A proponent of ESOs argues that no expense should be recorded for ESOs issued to managers and other employees, since they do not cost the employer anything. On the contrary, the employer receives cash equal to the ESOs’ exercise price. Do you agree that no expense should be recorded? Explain why or why not.
Answer to relevant QuestionsExplain why the value of ESOs and restricted stock to a manager is generally less than their fair values, such as Black- Scholes value for ESOs, or stock market value for restricted stock. In 2002, Toronto- Dominion Bank (TD) announced that it would voluntarily expense ESOs, starting with its 2003 fiscal year beginning November 1, 2002. Accounting standards in Canada did not require ESO expensing until fiscal ...Ittner, Larcker, and Rajan ( ILR; 1997) studied the relative weights placed on financial and non- financial performance measures in CEO bonus contracts for a sample of 317 U. S. firms across 48 industries for 1993– 1994. ...“Contracting internalizes the problem of information production.” Explain what this statement means. (CGA- Canada) Refer to Theory in Practice 12.3 concerning Canadian Superior Energy, Inc. Required a. Obviously, the news of well abandonment was a major factor contributing to Canadian Superior’s share price decline in March. However, ...
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