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 years beginning on or after January 1, 2004. In the MD& A section of its 2003 annual report, TD stated that it had charged to expense for 2003 an amount of $ 9 million for ESOs, using the fair value method. TD’s reported net income for 2003 was $ 1.076 billion, compared to a net loss of $ 67 million for 2002. Suggest reasons why TD would voluntarily expense its ESOs.
Answer to relevant QuestionsIn 2003, Microsoft Corp. discontinued its employees’ stock option plan in favor of restricted stock, vesting over a five- year period. At that time, many of its already- granted ESOs were under water (i. e., exercise price ...Aboody, Johnson, and Kasznik (AJK; 2010) examined a sample of 1364 firms over the years 1990– 1996 that suffered a decrease in share price of 30% or more. Of these firms, 300 repriced their ESOs. They found that the ...Refer to Theory in Practice 9.1, which describes UBS’s plans to pay a substantial percent-age of senior management bonuses by means of UBS bonds. Required Evaluate the effect of such a bonus plan, relative to a bonus plan ...Explain why the adverse selection problem is a source of market failure in the production of information. Do the same for the moral hazard problem. In November 2006, the financial media reported a 12- year jail sentence to Sanjay Kumar, ex- CEO of Computer Associates International, a large computer software company (now called CA Technologies Inc.). In addition, Mr. ...
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