Question

Explain the controversy involving stock compensation plans.

Answer 1

Solution:-

Explain the controversy involving stock compensation plans:-

When first proposed, there was considerable opposition to the recognition provisions contained in the fair value approach. The reason: that approach could result in substantial, previously unrecognized compensation expense. Corporate America, particularly the high technology sector, vocally opposed the proposed standard. They believed that the standard would place them at a competitive disadvantage with larger companies that can withstand higher compensation charges. Offsetting such opposition is the need for greater transparency in financial reporting, on which our capital markets depend.