Accounting for Share-Based Compensation: Fair Value Method

ABC Corporation, a publicly traded company, granted 1,000 stock options to its executives on January 1, Year 1, with an exercise price of $50 per share. The options vest over four years, with 25% vesting each year. The fair value of each option at the grant date was determined to be $10. On January 1, Year 5, the stock price was $70 per share and all options had been exercised. ABC Corporation uses the intrinsic value method for measuring the cost of share-based compensation. The company's stockholders' equity at the end of Year 5 was reported as $5 million.

If ABC Corporation had instead applied the fair value method for recognizing share-based compensation, what would be the impact on the income statement for Year 1?