Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
➤ Gửi thông báo lỗi ⚠️ Báo cáo tài liệu vi phạmNội dung chi tiết: Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
Voluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock OptionsyJanies R. FredericksonHong Kong University of Science and TechnologyMarilyn F. Johnson Eli Broad College of Business Michigan State UniversityMelissa F. Lewis Kelley School of Business Indiana UniversityDraft 0.999: April 14, 2004Preliminary. Comments welcome. Please do not quote without permission Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options.The authors thank David Aboody, Frank Acito, Dave Farber, Tom Linsmeier, Luann Lynch. Srini Rangan, Steve Rock, Jerry Salamon, Paul Simko, and particVoluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
ipants at accounting workshops at UCLA, University of Connecticut, University of Colorado. Michigan Slate University, and University of Virginia for cVoluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsupport of Emst Si Young, L.L.P. and the Kelley School of Business at Indiana University.Voluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsAbstractAccounting for employee stock options has been a controversial issue. Current U.S. regulations require firms to either r Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsecognize employee stock options as an expense on the income statement or disclose pro forma income figures in the footnotes adjusted for this expense.Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
Among firms that use footnote disclosure, some firms include language that disavows the calculation of stock option compensation. This study investigVoluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionse predict that some firms disavow due to concerns about the reliability of the stock option compensation amount. Second, we predict that some disavowals are motivated by executive compensation costs. Based on a sample of over 1,300 firms during 2001, we find that over 18% disavow pro forma income ad Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsjusted for stock option compensation. Our evidence provides only-weak support for the prediction that disavowals are related to reliability concerns.Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
However, there is stronger support for our predictions regarding compensation concerns. We find that sample firms are more likely to assert that pro fVoluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsere the CEO’s total compensation is “excessive”. These latter results suggest that executive compensation costs influence disavowal decisions.Voluntary disclosures that disavow mandatory disclosures: The case of stock options1. IntroductionThe Financial Accounting Standards Board (FASB) issued SPAS Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options123, “Accounting forSlock Options,” in 1995. This accounting standard requires that firms calculate the expense forStock options granted to employeesVoluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
based on die fair value of the options on the grant date.However, SFAS 123 gives lirms a choice between income statement recognition versus footnote dVoluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options (i.e., income statement recognition) or the firm can forego income statement recognition and instead disc lose pro forma income figutes in the footnotes that assume stock option compensation was expensed (i.e., footnote disclosure). Although the exposure draft of SFAS 123 required income statement Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsrecognition and the FASB encourages income statement recognition, the vast majority of U.S. firms historically elected footnote disclosure.1Among firmVoluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
s that use footnote disclosure, some firms include language that disavows the calculation of the stock option compensation expense amount. For exampleVoluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionson model was developed for use in estimating the fair value of traded options (hat have no vesting restrictions and are fully transferable. In addition, option valuation models require rhe input of highly subjective assumptions, including the expected stock price volatility. Because the company's em Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsployee slock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptionVoluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
s can materially affect the fair value estimate, in the opinion of management, the existing models do not necessarily provide a reliable single measurVoluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options. Hawaiian Electric industries, Winn-Dixie Stores Inc., Level 3 Communications Inc., and MacDermid Inc) treated stock option compensation as an expense in prior periods. However, many additional films started reporting stock option compensation expense in net income more recently, l or example, Weil Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options and Cummin Í20041 state that “nearly 500 U.S.-listed companies have begun expensing stock option pay or intend to start” (p. Cl). See Aboody, Barth,Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
and Kasznik (2004) for an examination of the factors associated with films' decisions to voluntarily recognize stock-based compensation expense under Voluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options firms disavow the mandated accounting disclosure concerning stock option compensation expense? More specifically, this study investigates the decision to disavow stock option compensation expense disclosed in the footnotes. We posit that this decision is made because the firm (or the firm’s manager Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options) perceives that the benefits of disavowing outweigh the costs? We investigate two hypotheses regarding the decision to disavow. First, we predict thaVoluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
t some disavowals are motivated by concerns about the reliability of the stock option compensation amount. In effect, these firms are conveying concerVoluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsls are motivated by compensation-related incentives. If executive compensation appears to be excessive and/or the CEO receives a substantial portion of total compensation from stock option grants, we expect that the film is more likely to disavow stock option compensation reported in the footnotes.T Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionshree characteristics of this particular setting motivate our investigation. First, the effect of stock option compensation expense on earnings appearsVoluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
to be significant. Botosan and Plumlee [2001] find that pro forma fully diluted earnings per share adjusted for stock option compensation is at leastVoluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionse recently. Taub [2004] notes that earnings per share for the s&p 500 would be reduced by an estimated 7.4% if stock option compensation expense is included in reported net income.Second, stock option accounting has been and continues to be an important and * *2For example, benefits could include th Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionse perception that the firm is enhancing the quality of the financial statement disclosures by providing additional useful information to stakeholdersVoluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
(e.g., alerting shareholders about legitimate reliability concerns in estimating stock option compensation expense). However, firms might be hesitant Voluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsbe interpreted as the firm having lower quality financial reporting.3As an extreme example, Yahoo! Inc. reported net income of over S70 million for fiscal 2000 while disclosing stock option compensation adjusted pro forma loss in the footnotes of over SI.2 billion.2voluntary disclosures (hat disavow Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options mandatory disclosures: The case of stock optionscontroversial issue. The FASB proposed income statement recognition for stock option compensation inVoluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
1993, but relaxed its position and ultimately allowed either income statement recognition or footnote disclosure in the face of significant lobbying aVoluntary Disclosures That Disavow Mandator)' Disclosures: The Case of Stock OptionsWalter G. Blacconiere Kelley School of Business Indiana University Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsent recognition of estimated stock option compensation expense. Again, the FASB’s current proposals have generated significant controversy.5Third, the voluntary disavowal of a mandated accounting disclosure included in audited financial statements is relatively rare in practice. Although almost all Voluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Optionsfirms provide general caveats regarding estimates that are included in financial statements,6 a specific statement questioning the usefulness of accouVoluntary Disclosures That Disavow Mandatory Disclosures The Case of Stock Options
nting information is much less common. The disavowal statements examined in our study relate to a specific measure of income that must be reported inGọi ngay
Chat zalo
Facebook