Incentive Stock Options Accounting Issues

Stock option incentive has attracted more and more attention in recent years. Many companies abroad have granted stock option to their employees. In our country, there are some companies which have tried to use stock option as a tool to inspire their employees, especially the high management, and they have succeeded to some extent. Stock option incentive has existed in the economic activities for several decades, while its accounting problem is still in great controversy. Some accounting standards have been issued in foreign countries, but they are far from perfect and are always questioned by many people. In our country, there have been no relevant accounting standards up to now. The absence of standard makes the handling of stock option accounting in a mess. The research on stock option accounting is an urgent task. This thesis aims at settling the accounting problem of stock option incentive, trying to get a basic frame on its settling method and provide a reference for the draft of accounting standard.The argument of this thesis is developed according to the procedure of accounting, that is, accounting recognition, measurement, and disclosure. At the last part, some suggestions are proposed on the special problem that only relate to the stock option accounting of our country.Our research is on the basis of accounting theory and the present accounting system of our country and come to conclusion with reference to the practice in our country and the accounting standards of foreign countries. Here's an introduction of this thesis.The preface is an introduction of the background of our research, mainly about the present situation of stock option incentive at home and abroad. And the thesis confines the field of research to the accounting problem of stock option, paying no special attention to other financial problems.The first part of the main body is the general theory about the stock option incentive and its accounting. The author gives its definition and points out its three characteristics. Then its special operation modes in our country are described. The author summarizes its accounting standards abroad and the practical settling method in our country and emphasizes the necessity of establishing accounting standard of stock option incentive in our country.The second part is a detailed discussion of its accounting recognition. Three questions should be answered about recognition: whether to be recorded, how to record, and when. The author comes to conclusion that stock option incentive should be recorded in accounting system as liability and expense after it is granted.Part Three is about the measurement of stock option incentive. The discussion is launched from the theory of measurement attributes. It is thought that the present value of future cash flow is the most acceptable measurement attribute of stock option incentive. Then the author discusses the B-S pricing model with the help of an example and proposes some revisions to the model to measure its value more properly.Part Four discusses the design of its disclosure system, including the general content of disclosure and some relevant special problems.The last part focuses on the issue of establishing accounting standard in our country. The author thinks the accounting of stock option doesn't violate the basic principle of our present accounting system. Then this part discusses the accounting problem of the special operation modes in our country. And at last the author puts forward some proposals on the matching measure of standardizing the stock option accounting.There are some innovations in this thesis as follows: 1. The author makes systematical research on the accounting problem of stock option incentive and provides a theoretical frame for its accounting handling which is a very meaningful subject.2. The discussion is on the basis of our present accounting system. It is thought to be possible and feasible to establish accounting standard for stock option in the frame of present accounti...