ACCOUNTING STANDARDS FOR EMPLOYEE STOCK OPTION DISCLOSURE: THE CURRENT DEBATE

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Abstract

The paper examines the implications of recent changes to accounting standards for employee stock based compensation with contingent features. The Dec. 2005 implementation of FAS 123R by the Financial Accounting Standards Board requires the fair value of such expenses to be recorded in net income. The change is now impacting the reported financial statements of firms that have been substantial users of employee stock options. This provides an opportunity to directly assess the actual impact of FAS 123R on such firms. Arguments for and against mandatory expensing are reviewed and an assessment of the contrasting positions provided. Significant limitations of current reporting requirements are identified.

Keywords: Accounting Standards, Employee Stock Options, Disclosure

How to cite this paper: Poitras, G. (2007). Accounting standards for employee stock option disclosure: The current debate. Corporate Ownership & Control, 4(3), 87-95. https://doi.org/10.22495/cocv4i3p8