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Should the IASB consider exercise date accounting for outstanding employee share options?

Should the IASB consider exercise date accounting for outstanding employee share options? This article investigates the most appropriate accounting treatment for expensing the fair value of employee share options (ESOs) in financial statements. The debate centres around whether the grant date or the exercise date is the most appropriate date for determining the value at which the ESOs are eventually accrued within the financial statements. After examining accounting models for each of the above measurement dates, the article concludes that exercise date accounting best reflects the economic substance of the ESO transaction. Therefore, the IASB should consider revising its definition of equity to encompass only existing shareholders, leaving all other financial obligations to be classified as liabilities. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Meditari Accountancy Research Emerald Publishing

Should the IASB consider exercise date accounting for outstanding employee share options?

Meditari Accountancy Research , Volume 13 (2): 18 – Oct 1, 2005

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References (14)

Publisher
Emerald Publishing
Copyright
Copyright © 2005 Emerald Group Publishing Limited. All rights reserved.
ISSN
1022-2529
DOI
10.1108/10222529200500014
Publisher site
See Article on Publisher Site

Abstract

This article investigates the most appropriate accounting treatment for expensing the fair value of employee share options (ESOs) in financial statements. The debate centres around whether the grant date or the exercise date is the most appropriate date for determining the value at which the ESOs are eventually accrued within the financial statements. After examining accounting models for each of the above measurement dates, the article concludes that exercise date accounting best reflects the economic substance of the ESO transaction. Therefore, the IASB should consider revising its definition of equity to encompass only existing shareholders, leaving all other financial obligations to be classified as liabilities.

Journal

Meditari Accountancy ResearchEmerald Publishing

Published: Oct 1, 2005

Keywords: Employee share option; Equity; Exercise date; Grant date; Liability; Opportunity cost

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