CA16 - by Dreier and Eshoo requires that the top five...

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CA16-4: (Stock Compensation Plans) (a) What are the major recommendations of SFAS No. 123(R), “Share-Based Payment? The major recommendations of SFAS No. 123(R), are that share-based compensation should be reported in the financial statements (instead of mentioning it in the notes to the financial statements); and that when employees’ services are valued and the related stocks are issued, to record them using the fair market value. (b) How do the provisions of SFAS No. 123(R) differ from the bill introduced by members of Congress (Dreier and Eshoo), which would require expensing for option issued to only top five officers in a company? Which approach do you think would result in more useful information? (Focus on comparability.) The provisions of SFAS No. 123(R) differs from the bill introduced by Dreier and Eshoo in that it requires that every stock issued to employees for services (instead of just the top five officers of a company) be recorded in the financial statements. Whereas the bill introduced
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Unformatted text preview: by Dreier and Eshoo requires that the top five officers of a company information regarding stock are left out of the financial statements. (c) The bill in Congress urges the FASB to develop a rule that preserves the ability of companies to use this innovative tool to attract talented employees. Write a response to these Congress-people explaining the importance of neutrality in financial accounting and reporting. The need for companies to use this innovate tool to attract talented employees is understandable, however the rules and ethics of the financial accounting world are more important and therefore should be followed. A company needs to follow these rules and ethics by fully disclosing all information, in the financial statements, which may be relevant to investors and creditors. The information reported in the financial statements must be honest, accurate, and neutral to ensure that the information provided meets full disclosure....
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