Explore BrainMass

Accounting for Stock-Based Options: option compensation expense

The FASB in SFAS No. 123, "Accounting for Stock-Based Options." encourages (but does not require) companies to recognize compensation expense based on the fair value of stock options awarded to their employees and managers. Early drafts of this proposal required the recognition of the fair value of the options. But the FASB met opposition from companies and chose to only encourage the recognition of fair value. Recently, however, FASB has revised this standard (SFAS 123R) so as to require recognition of option compensation expense.

Discuss the role you believe the following parties should play in the accounting standard promulgation process:

Companies (CEO)
Accounting firms

Discuss which parties lobbied for the change from requiring expense recognition to only encouraging the expensing of stock options.

© BrainMass Inc. brainmass.com August 15, 2018, 6:07 pm ad1c9bdddf

Solution Preview

NOTE: Additional
I suppose it would be the CEOs as this method would mean less volatility of and higher income AND sometimes their performances are judged on how much their companies earn

Admittedly, a varied type of groups including the Securities and Exchange Commission, the American Institute of Certified Public Accountants, the Congress, companies, accounting firms and investors have interests on accounting principles promulgated by the Financial Accounting Standards Board. Thus each of these groups together with FASB has different roles to play in the accounting standard promulgation process.

First, FASB is the promulgating body of accounting standards and principles in the United States. Its role is to continually assess existing standards and principles as regards their appropriateness with current business environment. Moreover, FASB is tasked with continual scanning of the business environment to analyze changes which result to business ...

Solution Summary

The solution examines accounting for Stock-Based options. The compensation expenses are determined.