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Unformatted text preview: rules. As far as IASB Exposure Draft “Sharebased Payment” is concerned, we will analyse the Comment Letters submitted
on the Discussion Paper, which preceded the Exposure Draft.
Only a limited number of Comment Letters will be analysed due to both, the
high cost of purchasing all of the available Comment Letters and the limited
time frame. 13 1.6 Thesis Outline
In this chapter we describe the research approach we used and the methods
applied to collect and process the theoretical and empirical findings. Finally,
we assess the quality of our research.
In this chapter we examine the concept of stock-based compensation, its effect
on company performance and the existing FASB and IASB rules and
regulations governing employee stock-based compensation plans. Further, we
discuss whether a stock-based compensation plan results in an expense to a
company or not. This chapter also deals with the problems and difficulties of
measuring the expense and recognising the timing of the expense.
This chapter covers the empirical evidence we collected in the course of our
work. We review the Comment Letters submitted by various companies with
regard to FASB and IASB issued standards and Exposure Draft concerning
accounting for stock-based compensation plans. Further, we describe the ways
in which a number of companies reflect the stock-based compensation expense
in their financial statements.
In chapter 5 we analyse the results of the study and present our reflections.
Chapter 6 contains the conclusions of our study and the conclusion to our
research question. In this chapter we also give suggestions for further possible
research. 14 2 Methodology
In this chapter various methodological approaches that can be used when
conducting research activities are discussed. We also explain which methods
we have chosen and why. 2.1 Research Approach
The choice of research approach depends on the degree of precision by which
the original research question can be formulated, and how much knowledge
exists in the area of the chosen subject. Patel & Davidsson (1994) state that
research approaches can have three characteristics as explained below.
When information is insufficient, the study is exploratory. The main purpose
with exploratory studies is to collect as much knowledge about a study problem
area as possible. This means that the problem is analysed from a number of
different points of view. A wealth of ideas and creativity are important
elements in explorative studies because these often aim at attaining knowledge
that can lay the foundation for further studies (Patel & Davidson, 1994).
The descriptive approach is best suited to investigations where there already is
knowledge. I n a d escriptive s tudy, o nly t he e ssential a spects o f t he
phenomenon are looked upon. The descriptions of these aspects are detailed
and fundamental (Patel & Davidson, 1994).
The hypothesis testing approach is used where information is extensive enough
to form new theories. The researcher collects and makes hypotheses that will be
tested in the empirical world and which will result in either acceptance or
rejection (Patel & Davidson, 1994).
In our thesis we used both exploratory and descriptive approaches. We
collected as much data as possible about the study object, using various sources
of information. Namely, we read a number of articles and other sources related
to stock-based compensation plans and accounting for them. Moreover, we
analyzed selected Comment Letters, which present the opinion of the business
community on the subject of accounting for stock-based compensation. This
data collection provided us with an extensive background on a variety of views
on the subject of our research. The descriptive approach is used in our study of
the existing and proposed rules regarding the accounting for stock option plans
and for how the companies account for stock-based compensation plans in their
15 2.2 Research Perspective
There are two major perspectives that can be applied to scientific research,
namely the positivistic approach and the hermeneutic approach (Patel &
The positivistic approach is based on experiments, quantitative measurements
and logical reasoning. It is based on scientific rationality. It should be possible
to e mpirically t est t he k nowledge i n o rder f or i t t o b e m eaningful.
Measurements shall replace judgments and estimations; explanations shall
come from a cause-effect relation. The positivistic approach is based to a large
extent on measurement of, and logical reasoning about, reality (Patel &
In the hermeneutic approach, the researcher approaches the study object from
his/her own understanding. The researcher uses his/her own knowledge,
thoughts, impressions and feelings in order to understand the study object.
These attributes are an asset for the researcher and not an obstacle. Under the
hermeneutic approach, the researcher tries to see the whole picture in a research
problem. Hermeneutics is about interpreting the...
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This document was uploaded on 10/31/2013.
- Fall '13