A STUDY TO ANALYSE ACCOUNTING FOR STOCK-BASED COMPENSATION PLANS

Abstract

This research takes a statistical look at how a cross-section of publicly listed corporations record their stock-based compensation programs. Academics evaluate how FASB as well as IFRS 2 may affect financial measures and reported costs. The overall fair value of the stock options granted, the reported compensation expenditures, and the variations in earnings per share (EPS) are key factors. Researchers examine the association between fair value measuring approaches and the reported variability of compensation expenditures using regression analysis. Our research shows that when comparing enterprises using different valuation approaches, those using option pricing models like Black-Scholes had far higher reported expenditures. Increases in compensation costs may have an effect on how profitable a company seems to be, as researchers find a statistically significant negative correlation between EPS and stock-based compensation expenditures. Our analysis also includes a correlation between investor responses as seen in stock price volatility and the quality of transparency about stock-based remuneration. According to the research, stock prices stabilise when investors feel less uncertainty as a result of improved disclosure standards. In sum, the findings of this study highlight the need of clear reporting standards and strong valuation methods in the context of accounting for stock-based remuneration. Accounting frameworks and stakeholder confidence in financial reporting are two areas that stand to benefit from the insights gathered.