Be Expensed?

the accounting for employee stock options. Under the new standard, equity-based compensation results in a cost to the issuing enterprise and should be measured at its fair value on the grant date, based on the estimated number of awards that are expected to vest. I contend that expensing stock or option grants is not responsive to either the needs of a corporation’s creditors, or to the needs of equity investors since the cost of the share-based payments is borne only by the preexisting shareholders; the corporation itself suffers no sacrifice in assets or other resources ’ (unless its own shares are consid-ered an asset, which is not the case under the present Conceptual Frame-work and Generally Accepted Accounting Practices [GAAP]). Hence, I suggest the use of three separate statements instead of the single income statement now provided. Specifically, I propose that the first statement-the “Corporation Income Statement”+ot include share-based payments as an expense. Rather, a “Statement of Costs and Benefits to Pre-existing Shareholders ” would show the dilution cost to the pre-existing sharehold