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Accounting for Stock-Based Options: option compensation expense

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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:

FASB
SEC
AICPA
Congress
Companies (CEO)
Accounting firms
Investors

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

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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.

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INTEL expense for stock options under the fair value method

Can one of you help me please answer the following question:

See attached

1- Intel reports the following information on its stock options incentive programs in its December 31, 2001 financial statement footnotes
The company's stock option plans are accounted for under the intrinsic value recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. As the exercise price of all options granted under these plans was equal to the market price of the underlying common stock on the grant date, no stock-based employee compensation cost, other than acquisition-related compensation, is recognized in net income. The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to employee stock benefits, including shares issued under the stock option plans and under the company's Stock Participation Plan, collectively called "options."
(In Millions) 2002 2001 2000
Net income, as reported $ 3,117 $ 1,291 $ 10,535
Less: Total stock-based employee compensation expense determined under the fair value method for all awards, net of tax 1,170 1,037 836
Pro-forma net income $1,947 $254 $ 9,699
Record Intel adjustments to the financial statements required to show an expense for stock options under the fair value method for 2001 and 2002.
Intel reports that its marginal tax rate is 35%.

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