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Research on Executive Stock Option Accounting

Author: YiYaoHua
Tutor: PengShaoBing
School: Southwestern University of Finance and Economics
Course: Accounting
Keywords: ESO Profit Distribution Theory Accounting recognition Accounting measurement Accounting Disclosure
CLC: F275
Type: Master's thesis
Year: 2010
Downloads: 253
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Abstract

ESO (Executive stock option, ESO) in modern corporate governance is considered to solve the principal-agent problem is one of the most effective incentives. ESO system by allowing operators to share the company's residual income, coordination between the owners and operators of the conflict, by setting future goals to bind future managers can reap the potential benefits, and thus ultimately owners and operators to achieve their own interests, to achieve corporate value or shareholder wealth maximization goal. In the 1990s, ESO swept major U.S. companies, and once stimulated the rapid development of economy. CPC China since 1999 Fourth Plenary Session \Managers actively pursued the practice of equity incentive system. However, China's stock option system is in the initial pilot phase and the Executive Stock Option Accounting Research nor depth. At present China's implementation of Executive Stock Option System companies are not the norm is not common, the manager of the accounting treatment of stock options is their own ways, in different companies vary widely. In this case, our Executive Stock Option Accounting normative problems to be solved. Based on the managers' stock option accounting recognition, measurement, disclosure of various aspects of the system, managers looking to build a stock option accounting methodology, while the West, especially the United States Executive Stock Option Accounting research to sort, summarize, essence of the theory to learn and grasp the development trend of guidelines, as I used to; On this basis, explore summed up China's current system of Executive Stock Option status and inadequate accounting for China's Executive Stock Option Accounting System Improvement provide a theoretical basis and countermeasures recommendations. First, the purpose of a study to explore better reflect the economic substance of ESO accounting treatment. This paper from the commission - agent theory, human capital theory, equity theory, and corporate body theory, in ESO itself the most important incentives based on the nature and find ESO economic substance, then put forward thinking - - What is the concept of cost or profit distribution concept to better reflect its economic substance it? Executive Stock Option Accounting and processing costs and profit distribution concept to conduct a comprehensive comparative view, and then analyzes the current accounting treatment. 2, explore the concept of profit distribution under the specific accounting treatment of stock options and manager recognition, measurement, recording and disclosure discuss and make recommendations. According to the accrual basis of accounting, exploring ESO accounting attributes to identify the most appropriate recognition of stock options and measurement attribute point to explore the specific accounting treatment of specific accounts may involve the distribution of profits, retained earnings, Share capital and capital reserves. Disclosure in the balance sheet, this paper from our disclosure ESO current situation, the first disclosure of the current situation to make a summarized, as a reference, and then make recommendations. Second, the main contents of the article from the overall structure point of view, this paper is divided into six chapters three parts, the first chapter is the introduction, is the first part. The second part includes a second and third chapters of this section focus on the learning of foreign domestic Executive Stock Option Accounting theoretical background and practical situation. After three chapters belong to the third part, mainly on the Executive Stock Option Accounting to conduct research into, respectively, from the accounting recognition, measurement and disclosure of three angles in depth, learn from foreign experience and relevant accounting standards specification, the reference to the specific national conditions and actual reality, the author proposed Executive Stock Option Accounting of the proposal, in order to improve China's Executive Stock Option Accounting normative and looking to provide a reference. The chapter is organized as follows: Chapter One: Overview of Executive Stock Option Accounting problems arise, and elaborates on the significance of this topic, this study describes the main ideas and contributions to research laid the foundation of the full text. Chapter Two: About ESO foreign domestic context and status quo. Chapter III: ESO and the economic substance of the underlying theoretical analysis. ESO institutional nature of talent is actually an incentive for managers aspects of future earnings from incentive in order to achieve separation of ownership and management nowadays lead managers lazy, and other short-sighted or impede the long-term Development behavior. This chapter from the incentive theory, principal - agent theory, human capital theory, theory and corporate ownership of several main theories perspective advocated that incentive stock options is to effectively combine both internal and external motivation theory as a powerful incentive, further analysis manager human economic substance of stock options, profit sharing concept study on corporate governance efficiency, noting that ESO is in fact the economic substance of the remaining share of the enterprise with the request, and thus concluded that better reflect the concept of profit distribution manager real economics of stock options. Chapter 4: Executive Stock Option Accounting validation studies. In the first section of this chapter, the United States and analyze and summarize the status of our country, pointing out that China is currently in stock option accounting recognition, there are still many problems, the main problems are: the initial recognition of the time is not uniform, recognition, there is a big difference, and its subsequent recognition and derecognition are not perfect, compared with foreign-related accounting system there is a certain lag. Then two parts illustrate this concept and support costs against profit distribution concept of reason, this article does not make that stock option costs occurring in the grounds there are four points: First, the establishment of stock options and beneficiaries are the shareholders, not the company itself ; two stock options is to improve profitability and shareholders bear the cost; three stock option plan is to bring the cost of remuneration corresponding corporate profits rather than revenues; Fourth managers participate in the distribution of human capital through further pointed out that the distribution of profits View Is ESO best reflects the economic substance. Respectively, from the initial recognition of this chapter, the subsequent three face recognition and derecognition accounting recognition of ESO issues were discussed. Finally the manager of the accounting treatment of stock options. Chapter V: ESO accounting measurement study. This chapter explores the Executive Stock Option Accounting attribute selection problem, considering the impact of future cash flows, the exercise price, the current stock price, stock volatility and stock option vesting period, and consider the discount rate in the case, that the use of fair value Properties regarded as a measure of stock options the best choice. Section II of this chapter discuss ESO measurement date selection ESO's measurement date related to the following date: Day gift, service date, the grant date and the exercise date and the date by way of example to explain the various measures for Executive Stock Option Value. The chapter concludes with a study ESO measurement methods, mainly divided into the intrinsic value method, the minimum value method and fair value method three kinds, the intrinsic value method, the value of stock options is equal to the stock price minus the exercise price, but because Stock options have time value, thus causing less settled option value can not fully reflect the true value of the option, the minimum value method to stock price volatility due to neglect rather than practical, and fair value method using the Black - Scholes model, etc. stock option pricing model to calculate the value of the option, it takes into account most of the factors that affect the value of options, as well as exercise time, transferability and other restrictions, it is possible to more fully reflect the value of stock options. The downside is that the variables in the model needs to make predictions, estimates, so its existence hypothetical calculations. Finally on the measurement of advice. Chapter VI: Executive Stock Option Disclosure of Accounting. This paper argues that ESO sheet disclosed the basic content should include the following aspects: (1) disclosure obligations; (2) disclosure form and time; (3) Disclosure of the basic content; basic content of which disclosure shall include at least : gift amount, gift objects, gift condition, donate time, the exercise period of time, equity sources. We should also ensure disclosure of the contents of clarity, true and reliable. Throughout China's actual situation, however, because China is not yet relevant laws and regulations in this regard to make mandatory disclosure, so Chinese enterprises for performance-based stock option accounting treatment seemed more casual, even for information users will have a greater ambiguity and misleading. The chapter concludes on ESO's disclosure suggested. Third, the main contribution to (a) find a manager from an economic perspective the economic substance of stock options, stock options that the current manager of the accounting treatment (expense outlook) is not suitable for managers reflect the economic substance of stock options to explore better reflect the Manager Stock Option economic substance of accounting treatment. From the principal - agent theory, human capital theory, equity theory, and corporate body theory, in ESO itself the most important incentive based on the nature, pointing out that ESO is the economic substance of the remaining managers of the company obtained and sharing, the manager cost accounting treatment of stock options and profit distribution concept of a comprehensive concept of comparison, further pointed out that the current view of the lack of adoption costs, noting that the profit distribution concept to better reflect its economic substance; (2) under the concept of profits made specific accounting treatment, from the recognition, measurement, recording and disclosure made some for the Perfection of Executive Stock Option Accounting system has certain reference value proposal. This article explores the Executive Stock Option Accounting attributes proposed stock option grants date should be recognized in the most appropriate point in time, it should be measured using the fair value method to explore the ESO specific accounting treatment of specific accounts related to profit distribution, retained earnings, capital and capital reserve. Outside the disclosure in the table, the content should be included in the directors' report described in detail the various options exist to fulfill the plans and their respective status.

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