On the Progress of Option-Regulating Legislation

2004 ◽  
Vol 2 (1) ◽  
pp. 75-83
Author(s):  
Wan-Kyu Park ◽  
Toni Smith
Keyword(s):  
Stock Options ◽  
Stock Option ◽  
Capital Gains ◽  
Financial Accounting ◽  
Economic Conditions ◽  
Tax Law ◽  
Legislative History ◽  
The Past ◽  
History Of ◽  
Tax Status

A great deal of debate currently surrounds stock-option-based compensation. Its many facets involve preferential tax treatment, the alternative minimum tax, and financial accounting procedures. The issue involves many; options affect an estimated 10 million people and 20–25 percent of all publicly held U.S. firms. Compensatory stock options were originally incorporated into the Internal Revenue Code in 1950 with the addition of Section 130A. At that time, the incentive effects of this form of compensation were deemed worthy of preferential tax status. In the 1950s, gains associated with tax-preferenced options were taxed at the lower, 25 percent, capital gains rate instead of the 91 percent applied to ordinary income. While stock option provisions have been revised and continue to be the topic of legislative discussion, they remain a part of tax law. This paper traces the legislative history of the special tax status of compensatory stock options and highlights the congressional intent and economic conditions surrounding the revisions made over the past 50 years.

scholarly journals Anger, Irony, and the Formal Rationality of Professionalism

2010 ◽  
Vol 28 (1) ◽  
pp. 241-248
Author(s):  
Ajay K. Mehrotra
Keyword(s):  
World War I ◽  
Historical Context ◽  
Historical Narrative ◽  
Economic Conditions ◽  
World War ◽  
The Past ◽  
Historical Figures ◽  
American Law ◽  
History Of ◽  
Formal Rationality

One of the challenges in writing about the history of American law and political economy is determining the proper amount of historical context necessary to make sense of past institutional and organizational change. Where to begin and end a historical narrative and how much to include about the broader social, cultural, political, and economic conditions of a particular place and time are, of course, questions that accompany any attempt to reconstruct the past. How one addresses these issues invariably shapes the motives and intentions that can be ascribed to historical figures. In their eloquent and thoughtful comments, Christopher Capozzola and Michael Bernstein have urged me to think more carefully about these issues, about where my story begins and ends, about the broader social, political, and material circumstances that animated World War I state-building, and about the seemingly apolitical ideas and actions of the Treasury lawyers who are the center of “Lawyers, Guns, and Public Moneys.”

scholarly journals Accounting For Stock Based Employee Compensation: A Continuing Controversy

2011 ◽  
Vol 3 (4) ◽  
Author(s):  
William Wrege ◽  
Mark Myring ◽  
Joe Schroeder
Keyword(s):  
Executive Compensation ◽  
Stock Options ◽  
Accounting Standards ◽  
Market Value ◽  
Stock Option ◽  
Font Size ◽  
Significant Component ◽  
Employee Compensation ◽  
Compensation Contracts ◽  
History Of

<p class="MsoBlockText" style="text-align: justify; margin: 0in 0.6in 0pt 67.5pt;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">Stock options represent an increasingly significant component of executive compensation. Theoretically, the inclusion of stock options in executive compensation contracts motivates managers to take actions that increase the market value of the firm's stock. Accounting standards regulating the treatment of stock options continue to be controversial. The focus of this paper is to examine the accounting treatment of stock options. We begin by outlining the controversial history of accounting for stock options.<span style="mso-spacerun: yes;">&nbsp; </span>Next, we examine the alternative accounting treatments for stock option.<span style="mso-spacerun: yes;">&nbsp; </span>Finally, we critique the proposed changes to the methods of accounting for stock options.<strong style="mso-bidi-font-weight: normal;"></strong></span></span></p>

Section 1031 Like-Kind Exchanges: Review of the Past and Proposal for the Future

2015 ◽  
Vol 13 (1) ◽  
pp. 1-16
Author(s):  
Edward J. Schnee ◽  
Shane R. Stinson
Keyword(s):  
Dual Use ◽  
Legislative History ◽  
The Past ◽  
Policy Suggestions ◽  
The Future ◽  
History Of ◽  
The Law ◽  
Over Time

ABSTRACT Congress created the tax-free exchange of like-kind property over 90 years ago and has since made several revisions to the law to prevent tax abuse and limit its application. However, the like-kind exchange rules, now governed by Section 1031, are expanding over time. In this article, we review the legislative history of Section 1031 and recently proposed changes to the law. In line with recent proposals, we recommend that Congress eliminate the special tax treatment granted to like-kind exchanges. However, in the event that Congress is unable or unwilling to make such a change, we also offer policy suggestions to limit current abuses of the like-kind provision relating to exchanges of investment property, the use of qualified intermediaries in non-simultaneous exchanges, and exchanges involving dual-use property.

scholarly journals Accounting for Stock Options

2005 ◽  
Vol 19 (4) ◽  
pp. 115-134 ◽  
Author(s):  
Jeremy Bulow ◽  
John B Shoven
Keyword(s):  
Stock Options ◽  
Accounting Standards ◽  
Financial Statements ◽  
Financial Accounting ◽  
Financial Statement ◽  
Financial Accounting Standards Board ◽  
Public Companies ◽  
Valuation Method ◽  
History Of ◽  
Reported Earnings

As public companies begin their new fiscal years, they are implementing a new and controversial Financial Accounting Standards Board (FASB, 2004) proposal for expensing stock options. Applied to 2003 and 2004, this rule would have slashed reported earnings of the Standard & Poor's 500 by 8.6 and 7.4 percent; the effect in the bubble years would have been more than twice as large. We describe the history of how these options have been expensed for financial statement purposes. We assess the new FASB approach and find that it is deeply flawed. The main purpose of the paper is to describe an alternative options expense valuation method, the Bulow-Shoven approach, that addresses these problems. Our approach is simpler than the new FASB methodology, less prone to earnings manipulation and more consistent with the way the rest of compensation is treated in financial statements.

Mathematics Didn't Just Happen!

2001 ◽  
Vol 94 (9) ◽  
pp. 780-784
Author(s):  
James E. Lightner
Keyword(s):  
History Of Mathematics ◽  
Economic Conditions ◽  
The Political ◽  
Mathematical Activity ◽  
The Past ◽  
The World ◽  
History Of

Students of the history of mathematics have long enjoyed the fascinating stories of the mathematical discoveries that have occurred over the past 4000 or so years. In considering the early developments, that is, those that happened before A.D. 100, we must often conjecture about who made the discovery or observation, where it really took place, and exactly when it happened. We still do not always know why the developments occurred when they did. However, mathematical developments often seem to be tied to the history of the world; certain periods of time have certainly been much more conducive to major mathematical activity than others. In other words, mathematics did not just happen; it was encouraged—or discouraged— by the zeitgeist—the nature of the prevailing culture— and the political, social, and economic conditions under which mathematicians had to work.

Stock option expense management after SFAS 123R

2014 ◽  
Vol 13 (3) ◽  
pp. 210-231 ◽  
Author(s):  
Jap Efendi ◽  
Li-Chin Jennifer Ho ◽  
Jeffrey J. Tsay ◽  
Yu Zhang
Keyword(s):  
Earnings Management ◽  
Stock Options ◽  
Design Methodology ◽  
Fair Value ◽  
Stock Option ◽  
Financial Accounting ◽  
Content Type ◽  
Management Literature ◽  
Prior Literature ◽  
Individual Input

Purpose – The purpose of this paper is to examine whether firms manage the total value of stock option grants downward after the implementation of Statement of Financial Accounting Standards (SFAS) 123R to reduce their reported option expenses. Design/methodology/approach – All Standard & Poor’s (S&P) 1500 firms with available stock option data in 2004 and 2006 are included in the analysis. The authors analyze if the total value of options granted, the per share fair value of options granted, the number of options granted as well as each individual input assumption have changed from the pre-SFAS 123R (i.e. 2004) to the post-SFAS 123R (i.e. 2006) period. We compare post-SFAS123R option pricing assumptions and per share fair value of options granted with their respective expected values to verify the results. We also analyze whether SFAS 123R has differential effects on firms which chose to disclose option expense only in footnotes (“disclosing firms”) versus firms which voluntarily recognized option expense (“recognizing firms”) prior to SFAS 123R. Findings – The results show that after SFAS 123R, the total fair value of stock options granted for disclosing firms declined significantly. The decrease appears to result from managerial discretion over volatility and dividend yield assumptions as well as the reduction in the number of options granted. The evidence suggests that firms engage in not only assumption-based manipulations but also real activities to lower reported stock option expenses. It was also found that disclosing firms lower the total fair value of stock options granted to a greater extent than recognizing firms. Originality/value – This study adds to prior literature that examines the opportunistic incentives for managers to use discretion in reporting stock option expenses. This study contributes to the earnings management literature by providing another example of manipulating earnings through real activities. Finally, our study should be of interest to regulators and investors.

Tòkana: The Collapse of the Rural Malagasy Community

2008 ◽  
Vol 51 (1) ◽  
pp. 85-104 ◽  
Author(s):  
Richard R. Marcus
Keyword(s):  
Decision Making ◽  
Community Involvement ◽  
Economic Conditions ◽  
Decision Making Process ◽  
Community Life ◽  
Associational Life ◽  
Economic Problems ◽  
The Past ◽  
History Of ◽  
Rule Making

Abstract:Madagascar is often cited as an example of a country with a long history of local institutional strength and stalwart community participation in the decision-making process. This article explores the crisis of community life in southern Madagascar, particularly the changed nature of community involvement. Associational life is in decline—a result not only of challenging economic conditions, but also of eroded social norms, as the rule-making institutions of the past have been replaced by the loose guidelines of the present. This situation, which has the potential of exacerbating economic problems, is also likely to have grievous political and ecological consequences.

scholarly journals Employee Stock Options Or Tax Nightmares

2011 ◽  
Vol 1 (1) ◽  
Author(s):  
Raj Kiani ◽  
Dwight Call ◽  
M. Sangeladji
Keyword(s):  
Stock Price ◽  
Stock Options ◽  
Effective Means ◽  
Stock Option ◽  
High Tech ◽  
Employee Stock Options ◽  
Highly Qualified ◽  
The Past ◽  
Cash Compensation ◽  
Set Up

In the past several years, many companies, especially in the high-tech, have used incentive stock options as effective means of attracting and maintaining highly qualified employees. With properly designed employees stock options, companies have been able to compensate highly paid executives with a little or no cash out flow. Accepting stock options in lieu of cash compensation has allowed employees to postpone tax on their compensations and to convert the ordinary income to the capital gain income through a later exercise and the sales of their stock options. These benefits can be achieved, if companies set up the stock options properly and employees apply them correctly. Otherwise, employees may get stuck in incentive stock option tax traps depending on the type of stock options. One tax trap related to the Incentive Stock Option (ISO) is a danger of an Alternative Minimum Tax (AMT). The tax trap related to Nonqualified Stock Option (NQSO) is the possibility of a phantom profit. This profit, even though the stock may not have been sold yet by the employees, must be reported by employer to the Internal Revenue Service through employees W-2 form in the year the options are granted or exercised, depending on the prevailing situation. Employees, who exercise this type of options and keep the purchased stocks, may risk watching the stock price decline but still having to pay taxes based on their paper profit.

LEGISLATIVE HISTORY OF THE ALLOWANCE OF LIFO FOR TAX PURPOSES

1989 ◽  
Vol 16 (1) ◽  
pp. 23-55 ◽  
Author(s):  
Morton Pincus
Keyword(s):  
Financial Reporting ◽  
Economic Conditions ◽  
Legislative Process ◽  
Tax Rates ◽  
Legislative History ◽  
Tax Legislation ◽  
History Of ◽  
Veto Points ◽  
Insight Into ◽  
Regulatory Event

The legislative history of the allowance of LIFO for tax purposes is documented. The legislative process was structured around veto points of the law and yielded an examination of the political environment out of which the LIFO tax provisions emerged. LIFO provisions were analyzed relative to alternative tax options available to firms, administrative and judicial activities, overall tax legislation including tax rates, and general economic conditions. Production processes of firms lobbying for LIFO were examined and the views of academics and practitioners were incorporated. In addition to providing the basis for a regulatory event study by identifying the critical dates in the legsilative process, insight into the timing and choice of inventory accounting methods for financial reporting as well as for tax is gained.

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