Premium
V aluing E mployee S hare O ptions : F our A ustralian C ase S tudies
Author(s) -
Brown Philip,
Dunlop Ian
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.tb00156.x
Subject(s) - valuation (finance) , shareholder , accounting , business , corporation , profit (economics) , finance , economics , actuarial science , corporate governance , microeconomics
We take four case studies to illustrate three issues: how ESOs are valued; how the valuation depends on assumptions; and how US proposals to account for ESOs would affect a company's financial profile. We adopt the Black‐Scholes options model to value ESOs issued by Brambles Industries, Coles Myer, Tabcorp Holdings and Westpac Banking Corporation. Under the FASB's proposal, after‐tax profit is lower and shareholders' funds and assets are higher beginning with the grant date. At the end of the amortisation period, assets and shareholders' funds would be the same as under current practice, but the fair value of the ESOs on their grant date would have been transferred from unappropriated profits to issued capital.