Financial Accounting Blog

Thursday, March 11, 2004

Forbes has this article that states the debate over expensing options has not focused on the right issue.

The granting of share options "became popular when there was a general feeling that you should align the interest of management and the performance of the firm," said George Perry, a senior fellow in economic studies at the Brookings Institution, a Washington, D.C.-based think tank.

But, he added, "the question is whether you provide the wrong incentives to companies and the people who receive the options."

In the WorldCom and Enron scandals, Perry noted, executives misled investors about their companies' financial performance to buttress the company's stock price -- and by extension the value of their own options.
The article also discusses the two most popular methods of calculating the value of stock options in financial statements.