In December 2004, the Financial Accounting Standards Board (FASB) adopted a new accounting standard for employee stock options (ESOs). This standard, entitled Financial Accounting Standards 123R, requires that the EDC is estimated at the grant date and expensed over vesting period of the options. The signatories to this position paper strongly opposed this revision GAAP, because they believe that the expensing of ESOs is incorrect accounting, leading to a serious violation of the financial statements of companies that are users of broad plans option. The case against expensing ESOs can be summed up in six simple statements: ESO is to "strengthen the joint document", in which the shareholders have agreed to share their profits (stock appreciation), if any, with the employees, enhancing the exchange of tools, by their nature, do not has cost accounting as long as there is profit to be shared, the cost increase sharing tool should be on the balance of the Party, which is profitable - for ESO gain reaped by shareholders, not the company, the cost of ESO, therefore, is of the shareholders; this value for shareholders (which, not incidentally, is exactly equal to profit after tax of the employee) have been duly taken into account by the treasury stock method (described in FAS 128, entitled "Earnings per Share") as a transfer value from shareholders owning employee option grants and no or granting ESO meets the standard definition of cost accounting. These six statements lead to the conclusion that the ESO, while it may have economic value for shareholders, not by the person who provides it. "Hide
by Kip Hakobyan Source: California Management Review 22 pages. Publication Date: Aug 01, 2006. Prod. #: CMR348-PDF-ENG
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