Backdating options is the practice of choosing a past date

Assignment Help Accounting Basics

Reference no: EM13483962

Executive stock options (ESOs) are used to provide incentives for executives to improve company performance. (ESOs) are usually granted, "at the money", meaning that the exercise price of the options is set to equal the market price of the underlying stock on the grant dated. Clearly, executives would prefer to be granted options when the stock price (and thus the exercise price) is at its lowest.

Backdating options is the practice of choosing a past date when the market price was particularly low. Backdating has not, in the past been illegal if no documents are forged. If communicated to the shareholders, and if properly reflected in earnings and in taxes.

1. Since backdating gives the executives an instant profit, why wouldn't the firm simply grant an option with the exercise price lower than the current market price?

2. Suppose the executive was not involved in backdating the ESOs, Does the executive face any ethical issues?

Reference no: EM13483962

Questions Cloud

Morse company manufactures basketballs materials are added : morse company manufactures basketballs. materials are added at the beginning of the production process and conversion

Calculate the predetermined overhead application rate : nautical accessories inc. manufactures womens boating hats. manufacturing overhead is assigned to production on a

Calculate electronics marts ending inventory balance in : on august 1st electronics mart had a beginning inventory of 40 mp3 players which it purchased for 50 each. on august

Analyze the passive activity rules as they apply to real : analyze the passive activity rules as they apply to real estate rental activities. in applying the passive activity

Backdating options is the practice of choosing a past date : executive stock options esos are used to provide incentives for executives to improve company performance. esos are

Erickson company sponsors a defined benefit pension plan : erickson company sponsors a defined benefit pension plan. the corporations actuary provides the following information

Abc moved into its new building on november 1 2013 the : prepare the proper adjusting journal entries for the abc company. assume all entries are made at year end december 31

Medical instruments produces a variety of electronic : medical instruments produces a variety of electronic medical devices. medical instruments uses a standard cost system

On the basis of the schedule above prepare the journal : the following amortization and interest schedule reflects the issuance of 11-year bonds by capulet corporation on

User Account

All Pages