An Argument for Recording Stock Options as Stockholders Equity

Disclosing the hidden executive compensation known as stock options has been the goal of the Financial Accounting Standards Board (FASB) since 1984. This initiative has been met with great resistance from the corporate world who would like to keep this compensation off of the books. The purpose of this paper is to explore the basic arguments of each side, and then come up with a compromise plan. The 100 page exposure draft by the FASB was my first source, and then further research from articles was researched for the opposing viewpoints. An appendix is included highlighting 13 various companies current footnote and/or financial statement disclosure of stock options. Neither the FASB nor the opponents discussed a willingness to compromise, which I propose they consider in this paper. My compromise entails recording the stock options, but not taking the amount out of earnings. This will allow for the disclosure the FASB wants without the negative impact on the income statement that would prevent many companies from issuing stock options and attracting good personnel.B.S. (Bachelor of Science