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Do companies exploit accounting rules for broad-based stock option plans? : a case study

Do companies exploit accounting rules for broad-based stock option plans? : a case study

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Prüfsumme: MD5:5ec6399a2569ea5732dcc540791e616e

HESS, Dieter, Erik LÜDERS, 2000. Do companies exploit accounting rules for broad-based stock option plans? : a case study

@techreport{Hess2000compa-11920, series={CoFE-Diskussionspapiere / Zentrum für Finanzen und Ökonometrie}, title={Do companies exploit accounting rules for broad-based stock option plans? : a case study}, year={2000}, number={2000/27}, author={Hess, Dieter and Lüders, Erik} }

Lüders, Erik 2011-03-25T09:41:06Z Lüders, Erik eng application/pdf 2000 2011-03-25T09:41:06Z deposit-license Several studies indicate that stock option plans are becoming more and more a substantial part of compensation schemes in U.S. companies. This paper argues that for an employer the attractiveness of stock options arises from the U.S. Generally Accepted Accounting Principles (US-GAAP) which require no charge to earnings for specifically designed stock option plans if a company opts for footnote disclosure. This poses a substantial problem for security analysis since a firm's earnings may be considerably upward biased. Based on a case study of 20 companies out of the S&P 500 which rely heavily on employee stock options we arrive at the conclusion that the amount of hidden compensation cost can be significant. For some of the companies the misrepresentation of stated earnings exceeds usual immateriality limits by far. Therefore, we propose that the fair value method of Statement No. 123 Financial Accounting Standards Board should be made compulsory in order to restore the true and fair view which 'income as stated' should provide. Do companies exploit accounting rules for broad-based stock option plans? : a case study Hess, Dieter Hess, Dieter

Dateiabrufe seit 01.10.2014 (Informationen über die Zugriffsstatistik)

dp00_27.pdf 205

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