Equity instruments similar to stock options, such as share appreciation rights settled in stock, also use the rules discussed above.
123(R), Share-Based Payment, has a single goal: to report the fair value of employee compensation paid in the form of stock options and other share-based payments in financial statements.
While share-based payment arrangements include stock options, restricted and unrestricted stock, share appreciation rights and employee stock purchase plans, this article focuses on accounting for stock options.
* Daimler (OTC: DDAIF) stock hit a new 52-week low of $12.56.
* Honda Motor Co (OTC: HNDAF) stock achieved a new 52-week low on Friday morning, hitting $24.75 and moving down 1.0%.
* Honda Motor Co (NYSE:HMC) stock hit a new 52-week low of $24.42.
A proposed acquisition of ADVO drew the market's disfavor and the stock dropped from $24 to $18 since early July.
The stock now looks oversold, at a 25% discount to estimated value.
The stock sells at an estimated 30% discount, signaling the chance for real profits.
Likewise, in another letter ruling, (23) an S corporation acquired all the stock of another corporation with AEP and elected to treat the subsidiary as a QSub.
In one instance, (24) two S shareholders gifted stock to an ineligible shareholder.
According to a Watson Wyatt analysis of the 86 Fortune 100 companies that offer employer stock as a 40 l(k) plan investment option, 21 are currently being sued by employees over company stock losses.
Few companies are taking the steps necessary to avoid or limit the damages from such lawsuits by, for example, restricting the amount of 401(k) assets employees can invest in company stock. In a survey of 458 businesses by Hewitt Associates, 83% of companies that offered company stock as a 40 l(k) investment did not place any restrictions on how much employees could invest in company stock.
This example illustrates the power of leverage that is unique to stock options.
The choice between stock options and restricted stock can be boiled down to risk allocation between management and shareholders.