Expensing Stock Options Or Not: Does It Matter?
- Topics:
- Accounting software
- Tags:
- Benefits,
- Finance,
- Financial Accounting,
- Human Resources,
- Investment,
- Stock,
- Stock Option,
- Stock Options,
- Stock Options & Grants
- Source:
- The CPA Journal
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Overview: Fixed stock options are given to executives as compensation for services rendered. Granting stock options, however, entails no outflows, use of assets, or incurring of liabilities. When executives exercise options, they pay cash and the company issues common stock. When stock options expire without being exercised, there is no change in a company’s assets, liabilities, or equity. Stock options should be recorded as an expense as well as a liability. The purpose of granting options to executives, to align their compensation incentives with increased shareholder value, was not accomplished because executives still try to increase their company’s stock price to profit from their stock options when they exercise them. Besides discussing this, the article also points out the recommendations sock options that should be deducted as an expense in income statements.
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Format: HTML | Date: Jan 2003 | Pages: 1
