Accounting According to FASB, Discuss Term Paper

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Given this situation then, it is required that any modification in stocks be operated in the financial statements as well. As such, when an executive resigns and forfeits on his stock before vesting, the financial statements will reflect this situation. On the one hand, the stocks would be registered as new equity. On the other hand, they would be presented to the other stakeholders -- already existent ones or new ones -- and these would be able to purchase them. In other words, changes would be operated at the level of capitals and equity.

4. If options are allowed to lapse after vesting, what is the effect on the financial statements?

Firms will often intentionally let their stock options suffer devaluations either because they do not wish to interfere within the market and they maintain their objectivity, either because they have a direct interest. In the first scenario, the underlying process of thought is that the market would correct itself after the vesting has been adequately integrated. In the second scenario however, the most common rationale is that the company desires to repurchase part of its shares in order to reduce its debt to the shareowners.

This change is also revealed within the financial statements, in the sections dedicated to borrowed capitals, where changes would be operated to state the value of the lapsed shares, as well as their volume.

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The specifics depend however on the reporting style of each firm. BT Plc. uses the following reporting style:

Source: Website of BT Plc., 2008

5. Discuss the current issue surrounding executive compensation.

The primary concern with the stocks which have been granted to the executives is given by the fact that the large majority of the executives does not possess sufficient knowledge and/or expertise to understand and best deal with their benefits. This specifically indicates a situation in which training is necessary. The term training might be loosely used at this stage, and it would relate to a meeting during which the financial specialists of the company would explain the details of the stock option compensations to the executives.

The secondary issue is pegged to the ethics and morality which would be used in the exploitation of the stocks. History has revealed numerous instances in which executives used company funds in illicit manners. This is not the case at Stamos & Company and the managers and auditors would have to ensure that it does not become the case......

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