Research On Accounting Treatment For Equity Incentive

Equity incentive mechanism is known as an effective long-term incentive mechanism under modern enterprise system. Nowadays, in order to encourage managers to work hard and maximize enterprise value, more and more companies begin to implement the equity incentive plan. In2006, NO.11:Share-based Payment was issued by China’s Ministry of Finance Department to regulate the accounting methods related to equity incentive. However, the accounting standard was established when the equity incentive mechanism didn’t come to its maturity, so the standard might not cover all the equity incentive accounting issues. At the same time, the development of equity incentive practice also needs the standard to be more specific. Based on the equity incentive practice in China, the article analyzed the accounting problem existing in the practice, trying to provide reasonable advices for the improvement of accounting standard for equity incentive issue.The article firstly elaborated the accounting recognition and measurement principles of equity incentive issue according to the accounting standard. Then56listed companies which conducted equity incentive plans among2009and2011are selected as examples. These companies are all carrying out equity incentive plans during the research period. The research started from the key time and period in the incentive plan. According to the research, there are some details of equity incentive accounting issue not specified in the accounting standard, which leads to the arbitrariness of accounting treatment in practice; even different companies tend to choose different accounting methods with the same issue. The details which are not regulated in the accounting standards include:the parameter selection of the option pricing model which is used to estimate the fair value; the allocation method of the total cost of equity incentive; the accounting treatment of failure equity instruments; the accounting treatment of reserved equity incentive; the accounting treatment of equity incentive plan termination; the accounting treatment of extracting incentive fund. The article analyzed the above questions successively, and finally proposed suggestions for corresponding accounting treatment.Finally, considering the problems found in the study, the article attempted to provide some advices on the accounting standard in order to increase accounting information quality and reflect essence of the equity incentive issue.