Sign In
Not register? Register Now!
Essay Available:
Pages:
2 pages/β‰ˆ550 words
Sources:
1 Source
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 11.23
Topic:

Employee Stock Options as an Expense and the Method of Valuing Them

Research Paper Instructions:

Please see attachments.
As part of its due process, the Financial Accounting Standards Board (FASB) gathers feedback on its proposed standards. In many cases the organizations or persons responding provide useful information because they provide a viewpoint the FASB has not fully considered or else provide technical information about a particular industry or practice the FASB has failed to consider.
In this assignment, you are going to evaluate the arguments raised by Micron in its comment letter on FASB's proposed standard on share-based payments that later was finalized as SFAS 123R, Share-Based Payments. SFAS 123R, later codified as ASC 718, requires companies to recognize expenses using the fair value of the stock options granted to executives and employees.
Required:
Write a two-page memo (12-point Times New Roman font, one-inch margin on all sides, double spacing) using the format in the Memo Guidelines to address the following two questions:
1. The first two main points raised by Micron are:
a. Employee stock options granted at market price do not constitute an "expense" under present accounting definitions, do not represent an economic cost to the issuer and should not be recognized as a compensation expense of the issuing company.
b. The measurement methodologies and tools recommended by FASB rely significantly on management judgments and estimates and will lead to a lack of consistency and comparability among reported results.
State whether you agree or disagree with Micron on these two points. Explain.
2. Based on your general understanding of the FASB's conceptual framework and the debate over expensing stock-based compensation, would you support or oppose to FASB's requirement of recognizing stock-based compensation expense measured using fair value? Explain.
There is not necessarily right or wrong answer to each question. Express your opinion and back them up with facts and reasoning. Do some research online. You can use all available literature as reference, including those listed below (download on Blackboard).
References:
ο‚· Guay, Wayne, Kothari, S.P., and Sloan, Richard (2003), Accounting for employee stock options. The American Economic Review, 93(2), 405-409.
ο‚· Micron Comment Letter on FASB's Proposed SFAS 123R, June 30, 2004

Research Paper Sample Content Preview:
Accounting Research
Name:
Subject
Date of Submission:
To: Director of Major Projects
FROM: Enter Your Name Here
DATE: June 14, 2007
SUBJECT: MICRON’S ARGUMENT ON ASC 718
Introduction
Many companies embrace the idea of using employee stock options (ESOPs) to motivate their employees. Specifically, employee stock options are used to increase stockholder value because it motivates employees to think like stockholders. It is critical that the use of employee stock options is generating a heated debate among scholars and practitioners who apply them. This owes to the reality that the industry is debating on the appropriate way of accounting for ESOPs. The main arguments of the debate are whether ESOPs are an expense and the appropriateness of methods used for Valuing ESOPs.
Employee Stock Options as an Expense
Micron wrote a letter to the Financial Accounting Standards Board (FASB) on the subject in question. Simply put, Micron argued that employee stock options do not meet the FASB definition of expenses, and cannot be deemed as an expense in the income statement. Micron further revealed that ESOPs are recorded in books as earnings per share. This implies that expensing ESOPs would double-count employee stock options (Guay et al., 2003). It is also notable that investors believe deducing ESOs from wages and salaries convey a notion of weaker financial results. However, some scholars believe that using ESOPs to motivate employees constitutes to the cost of labor and must be included in the income statement.
Valuation Methods Lead to Lack of Consistency and Comparability
Another argument on the existing debate focuses on the measurement methodologies used for employee stock options. According to the letter written by Micron, the existing methodologies such as the binomial and the Black-Scholes used for measuring employee stock options result in the lack of comparability and consistency. As evidence, the letter highlights three weaknes...
Updated on
Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now:
Order

πŸ‘€ Other Visitors are Viewing These APA Research Paper Samples:

HIRE A WRITER FROM $11.95 / PAGE
ORDER WITH 15% DISCOUNT!
Order Now