Equity Compensation Plans after SFAS 123 (R)*

Abstract

The increased use of stock options as a compensation component and the subsequent failure of firms where their use was prevalent forced both Congress and the Financial Accounting Standards Board (FASB) to enact new legislation and regulations in 2002 that, among other things, required Corporations to disclose more information on their financial statements and to initially voluntarily recognize stock option grants as an expense on their financial statements. In 2004 option expensing became mandatory. This investigation examines the type of changes made by a group of firms to their Equity compensation plans after the mandatory expensing of stock options went into effect.