An Evaluation Of Fair Value Accounting For Employee Stock Options
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Keywords
ESO, Fair Value Accounting, Simulation Analysis
Abstract
This paper employs static and simulation analysis to consider the measurement properties of the currently active accounting standards for reporting compensation expense related to Employee Stock Options. We find that under a wide range of plausible scenarios the reported expense significantly understates the cash cost incurred by the entity at exercise. The paper includes a discussion of implications for practice and standards setters.
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