An Analysis Of Accounting For Stock-Based Remuneration Systems

Abstract

This study examines the stock-based compensation plans of a sample of publicly traded companies from a statistical perspective. Financial metrics and reported expenses are two areas that academics assess considering FASB and IFRS 2. Important considerations include the disclosed compensation costs, the total fair value of the issued stock options, and the fluctuations in EPS. Using regression analysis, the researchers investigate the correlation between various fair value assessment techniques and the reported variability of compensation expenditures. When researchers compared businesses that used various valuation methods, Researchers found that those that used option pricing models, such as Black-Scholes, reported much greater expenditures. A company's apparent profitability might be affected by an increase in compensation expenditures, as there is a statistically significant negative link between EPS and stock-based compensation expenditures. The degree of openness about stock-based compensation is also correlated with investor reactions as measured by stock price volatility in student’s research. When investors have less uncertainty because of better disclosure rules, stock prices stabilize, according to the study. Accounting for stock-based compensation requires transparent reporting requirements and robust valuation methodologies, according to this study's conclusions. Gains in understanding could be seen in accounting standards and the trust that stakeholders have in financial reporting.