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Further, an Exposure Draft is issued, which is followed by an accounting
standard. All interested parties are allowed to express their opinion by
submitting Comment Letters on Discussion Memoranda/Paper and Exposure
Drafts (www.ici.org/fasb_streamline_com). Comment Letters are the primary
means by which constituents can communicate with FASB and IASB on their
proposals. They are the source of feedback on the conceptual soundness,
technical accuracy and appropriateness of the proposed rules. In addition,
comments from interested parties are particularly helpful in understanding
whether the information provided in proposed rules is useful in fulfilling the
needs of those who eventually use them (www.gasb.or/dueprocess-cl).
We made a selection of Comment Letters from different companies and
organisations. There were more than 700 Comment Letters submitted on the
Exposure Draft to SFAS 123 (www.fei.org/advocacy/download/StockOptionswhitepaper.pdf). Due to the high cost and shortage of time it was not possible
to study all the letters; therefore we have chosen ten of them. The total number
of Comment Letters submitted on SFAS 148 was 77. We selected Comment
Letters of seven companies and two professional organizations for our study.
IASB Discussion Paper (which preceded ED 2) received 311 responses
(www.iasb.org.uk/cmt/001.asp). Since it was not feasible to examine all the
18 submitted letters, we have chosen ten Comment Letters. The total number of
the Comment Letters on the Invitation to Comment is not known yet since the
response period is still ongoing. The choice of companies was not totally
random, but based on our intention to consider the opinions of companies
transacting in major industries, namely in financial services and management,
software, telecommunications, steel, petroleum, automotive and beverage. The
selected companies are the leaders in their industries.
We chose ten companies, from those whose Comment Letters we reviewed, for
specific investigation of how they account for stock-based compensation
expense. W e e xcluded a ssociations o f c om panies a nd p rofessional
organizations as they represent the views of a group of companies but do not
use stock-based compensation expense themselves. 2.6 Quality of the Research
To be able to achieve a high level of credibility for the conclusions presented in
this thesis, it is important to demonstrate that the research was designed and
conducted in such a way that it accurately identifies and describes the
phenomenon that was investigated. In order to do this, it is important to
describe issues concerning the research project’s validity and reliability (Ryan,
et al., 1992).
Validity is one element of science research which deals with the issue of
whether the research actually measures the things it aims to measure, and that
nothing irrelevant affects the result. According to Lekvall and Wahlbin (1993),
validity can be divided into constructive, internal and external validity.
Constructive validity assesses whether there is a correct relationship between
theories and empirical findings. Internal validity approximates the truth about a
presumption regarding cause-effect or causal relationships. Thus, internal
validity is only relevant in studies that try to establish a causal relationship.
External validity considers whether the findings can be generalized and
provides conclusions regarding other situations than the specific case studied.
Reliability considers the quality of measurement. It clarifies to what extent the
findings can be replicated when using the same research method, i.e. if the
measurement tool will generate the same or similar results if another researcher
who follows the same procedure replicates it (Lekvall &Wahlbin, 1993).
To ensure the validity of our thesis we tried to use as many sources of
information as possible and to link them to each other. We carefully studied the
literature, articles and accounting standards available. We presented a thorough
explanation of the rules governing the accounting for stock option plans and the
19 application in practice. Based on that information, we established the main
issues which raise concerns of business enterprises regarding accounting for
stock-based compensation expense.
It is difficult to evaluate the reliability of our study as we a used qualitative
research method. However, we can say reliability of our study is supported by
the examination of the underlying standards, Comment Letters that were
available, and annual reports. Of course, the conclusions we make, in Chapter
6, are necessarily based on the limited number of companies under study. We
have selected a broad-based group of companies, from different sectors of
business community, in order to achieve a representative sample. Our
conclusions are based only on this sample collection. 20 3 Theory
In this chapter 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 are discuss...
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This document was uploaded on 10/31/2013.
- Fall '13