ESO Accounting: Emerging Issues and Trends

THE ICFAI UNIVERSITY PRESS ON ACCOUNTING AND ITS APPLICATIONS, pp. 113-129, L. Venu, ed., ICFAI University Press, 2009

Posted: 2 Apr 2010 Last revised: 11 Nov 2011

See all articles by Pankaj M. Madhani

Pankaj M. Madhani

Former Dean (Academics) & Professor

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Date Written: March 26, 2010

Abstract

This article describes employee stock option mechanism and underlines the rationale for ESO grants. It also explains how ESOs differ from ordinary call options. In recent years, accounting scandals (e.g., Enron, Tyco and WorldCom) created an environment that demanded more transparent and higher quality financial reporting. Accounting for Employee Stock Options (ESOs) has been one of the most controversial topics in financial reporting during the last decade. Many employees receive equity compensation as a supplement to their salaries. Traditionally, this compensation comes in the form of ESO grants. Subsequently ESO grants and accounting methods came under increased scrutiny by regulators.

Keywords: ESO, Stock Options, Accounting

JEL Classification: M41, G12, G24

Suggested Citation

Madhani, Pankaj M., ESO Accounting: Emerging Issues and Trends (March 26, 2010). THE ICFAI UNIVERSITY PRESS ON ACCOUNTING AND ITS APPLICATIONS, pp. 113-129, L. Venu, ed., ICFAI University Press, 2009, Available at SSRN: https://ssrn.com/abstract=1578787

Pankaj M. Madhani (Contact Author)

Former Dean (Academics) & Professor ( email )

India

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