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A ccounting F or E mployee S hare O ptions
Author(s) -
Brown Philip,
Howieson Bryan
Publication year - 1994
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/j.1835-2561.1994.tb00155.x
Subject(s) - remuneration , accounting , executive compensation , business , shareholder , equity (law) , stock options , asset (computer security) , compensation (psychology) , finance , corporate governance , political science , psychology , computer security , computer science , psychoanalysis , law
Accounting for employee share options (ESOs) has caused a furore in the United States. Understandably, Australian standard‐setters are moving cautiously but have signalled they may follow the FASB's lead. ESOs are a major form of executive remuneration but have not usually been recognised in the employer's financial statements unless and until they are exercised. The FASB has proposed that ESOs be valued on their grant date and immediately recognised as an asset (prepaid compensation) and additional shareholders' equity (options outstanding); the asset is then to be amortised over the period in which the employee's services are received. We describe and comment on the debate, in the light of the proposal's likely impact on firms' financial profiles.