Accounting for Employee Stock Options
Posted: 7 Mar 2003
Date Written: January 2003
Accounting for employee stock options (ESOs) is controversial, with many arguing that it has substantial economic consequences. Such arguments rely on the assumption that one or more interested parties fixate on accounting numbers and fail to understand the real costs and benefits of ESOs. We review the various accounting issues and economic consequence arguments created by ESOs. We conclude that the accounting should facilitate a clear and consistent understanding of the costs of doing business, and that expensing ESOs best achieves this objective.
Keywords: Accounting for Employee Stock Options, Stock Option Expense, Diluted Earnings Per Share
JEL Classification: G30, J33, M41
Suggested Citation: Suggested Citation