CA16-4 - CA164 (a) In 2004, the FASB issued SFAS No....

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CA 16-4 (a) In 2004, the FASB issued SFAS No. 123(Revised),  Share-Based Payment. Generally,   the   standard   indicates   that   employee   stock   options   be   treated   like   all   other   types   of  compensation and that their value be included in financial statements as part of the costs of employee  services. The standard requires that all types of stock options be recognized as compensation based on  the fair value of the options. Fair value for public companies would be estimated using an option-pricing  model. No adjustments after the grant date would be made for changes in the stock price—either up or  down. For both public and nonpublic companies, the value of the award would be charged to expense over the  period in which employees provide the related service, which is generally considered the vesting period. Expense is recognized over the service period with adjustment (reversal) of expense for options that do  not vest, if employees do not meet the service requirement. (b) According to Ciesielski’s commentary, the bill in Congress would only record expense for the options  granted to the top five executives. They also are recommending that the SEC conduct further study of  the issue and therefore delay the implementation of the new standard. From a comparability standpoint,  it is highly unlikely that recording expense on only some options would result in useful information. It will 
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This note was uploaded on 10/22/2008 for the course ACC 449 taught by Professor Long during the Summer '08 term at University of Phoenix.

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CA16-4 - CA164 (a) In 2004, the FASB issued SFAS No....

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