Study On Accounting Recognition Of Executive Stock Option

Since the first Executive Stock Option (ESO) appeared in American company in1952, it has been favored by every state and every corporation for its superiorities on corresponding benefits between the owners and the managers, cutting down agent costs, improving enterprise values. The American studies and applies ESO firstly, some should learn form them, though it still has much disputability on its accounting recognition and measurement .Executive Stock Option is a kind of stock-based incentive method,which begins in the middle of 20 century and is popular among western countries from eighty's. In order to settle incentive problem in our country, it as the effective incentive scheme is applied to our country's companies from 1999. But there are different conditions in different companies, so ESO is differently recognized. One of most debate is about accounting elements and accounting day which ESO should be recognized. Through research on ESO, this paper raise proposal about accounting elements and accounting day which ESO should be recognized, in order to coach enterprises on accounting treatments and provide base for accounting theory.This paper is based on the fundamental principle of Accounting Recognition, and the analysis of the ESO's economic essence, combined the current achievement, to form a personal opinion about the accounting recognition of ESO, which can settle the problems on accounting elements and accounting day.There are seven parts in the paper:1) The first part mainly includes the research background, international research situation.2) The second part is about the development and the conception of ESO, ESO's basic theories and the drives effect.3) In the third part, I carried on in-depth analysis to its economic essence on the basis of understanding the connotation, the theoretical fundament and incentive mechanism of ESO deeply.4) The forth part is the core of the paper. In this part,I discussed the three dissensions about the accounting recognition of ESO,on the basis of the economic essence of ESO and the conception of accounting recognition. Then, the conclusion is obtained in the end of this part: ESO should be reflected in the balance sheet; ESO should be recognized as"expenditure"and"ownership"; ESO should be initial recognized at the grant day.5) The fifth part is the research on the economic result of ESO's recognition. I discussed the economic result of ESO's recognition by using the conclusion of above parts, and quoted the"Enron Fails"and"Microsoft abandoning ESO plan"as the example to prove the conclusion above reasonable.In addition, I made some contribution in this paper. The first one is using the theory of"economic result"to study the problem of ESO's recognition; the second one is collecting and analyzing the various opinions on the problem to judge them whether suitable for the current economic environment; the third one is citing two examples to prove the conclusion of this paper.