Minicase-10(Managerial Accounting) Essay Example | Topics and Well Written Essays - 500 words

Minicase-10(Managerial Accounting) - Essay Example Restricted stock is that part of equity of the company that is allotted or sold on a conditional basis in lieu of compensation to be paid or as a part of ESOP. The conditions associated with the restricted stock would be that the investor should hold the stock for certain period of time. Another condition would be that the Employee needs to stay with the company for certain period of time to be eligible to trade in the restricted stock. Companies need to disclose the Stock based employee compensation in the Notes to the financial statements. 1ESOPs should be accounted based on Fair value based method of accounting or intrinsic value based accounting. Compensation cost under the fair value based method is measured at the option grant date based on the value of the option and is recognized over the service period, which is usually the vesting period. Compensation under the intrinsic value based method is the excess, if any, of the quoted market price of the stock at grant date over the amount an employee must pay to acquire the stock. Restricted stock awarded to an employee is measured at the market price of the non-restricted stock on the grant date. However, if a restriction is imposed after the employee is vested with the stock, then restricted stock is accounted at the fair value of stock calculated after taking into account such restriction. The major advantage of ESOPs is that the compensation cost pertaining to ESOPs is not charged to profit and loss account but is just disclosed in the notes to the financial statements. This would enable the companies to show more profits. Now the proposed accounting change of FASB is to make the companies to charge ESOP to the Profit and loss account. This will reduce the profits of many companies and hence the price of the stock of the company, this would prevent these corporate managers from selling the ESOPs granted to them. Apple