Current accounting rules specify that companies must recognize the cost of compensating employees through stock options (ESOs)
Question:
Required:
a. Briefly describe the accounting for ESOs.
b. Why is there a cost when a company grants ESOs with an exercise price equal to the current market price?
c. Critics claim that ESO accounting recognizes the costs but not the benefits that arise from granting ESOs, such as improved employee motivation and employee retention. Is this true?
d. Discuss how you would deal with the compensation expense arising from ESOs if you were (1) an equity analysts and (2) a credit analyst.
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Related Book For
Financial Statement Analysis
ISBN: 978-0078110962
11th edition
Authors: K. R. Subramanyam, John Wild
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