Accounting for Stock-based Compensation: The Devil is in the Details

Now that companies have begun to account for stock options on their balance sheets, investors will be able to compare various companies' stock option practices. But the real story, as these professors write, is still in the fine print. Disclosure of the fair value of stock option compensation is available for the first time in the notes to the financial statements of Canadian companies. However, because of differences in the reporting presentation and the assumptions made to obtain the inputs to option-pricing models, investors should not assume that these disclosures will allow them to compare option-granting behaviour across firms