An Analysis of Stock Option Harvard Case Solution & Analysis

Congressional Intervention in the Standard-Setting Process

In this report, the matters of lobbying via the contribution of PAC are deliberately going on which have to identify the precautions and their conclusion. For the analysis with statistical tools then take the sample 400 firms to have an active relationship with PAC and estimate the best judgment regarding the stock price under H.R 3574.  Furthermore, the contribution is made through PACs in the sample size with analyzing their impact. Moreover, the results show the positive response between the H.R and Political Action Committee of the option expense amount relates to other employees. These effects specially concerned with the contributions of the members of the house. This consequence shows the matter of expensing the stock options to other employees, which is comprised on average 92% will affect negatively on the wealth of the shareholders and the main employers.

Furthermore the discussion done between the FASB preference about stocks of fair value with top executive and the lobby does not comply with it. The reason is the they concern on the full fair value which itself inferior to the information on the stock. On the other hand, other members are well to the standards which are following to be set.

In the end, the Congress is always making some better decision for the accounting system and not based on the old theories of the accounting. Moreover, they belong in the implementation of the standard which is in the environment of Congressional intervention for the accounting professions.

Problem Statement

The problem is that final explanation of the H.R 3574 and the stock option reform act and their justification from the House of Representative. On the other hand, political actions committee`s contribution is the crucial part of the report which determines the lobby effects in terms of reported stock value of the top executive and their cost recognizing of the expense. The house passed the act on certain things which are the H.R impact and employee shares based payment with the understanding the International Accounting Standard Board (IASB), financial Accounting Standards Board (FASB) and Generally Accepted Accounting Principles (GAAP). On this matter some of the house members are against and some are in the favor.

Furthermore, Political Action Committee is involved in the company’s financial statement and their policy. The house is restricted to some contribution to the PAC, which is $5,000 for the benefit of the stakeholders. This effect is done because of the legal criteria where many company same like have done some fraudulent activities which will effect on the economy as well as the stock market. The main essence of this research is to deal with fair value stock option expense under the new forms of the standards. These problems of top executive and other employee will be resolved through different analysis, which is already done in the article. In the justification of the article will follow on the different headings in this report. On the other hand, research deals in the more Financial Accounting Standards Board proposals and Congress lobby over the financial Accounting of the marketable securities. One keen line has to identify with respect to the stock option is that the increasing in the fair value is the magnitude of the represent stock options with their potential with respect to the firm, executive and other employees.

Methodologies for the analysis

The method is used to analysis the stock of the top executive, other employee and an employee on the H.R. The first method is statistical tools in which cover the descriptive and inferential analysis. These analyses are attached to this report in the appendices. During this investigation, first have to calculate the stock option expense in which the standard deviation of three quarters reflects 70.8 million with the combination of $65 million of other employees, $5.9 million for Top executive and $1.5 million for H.R stock expense. In this whole calculation other employee has more values in respect of another. Moreover, move on they have asset percentages is 56%, covers 43%, 9% and 4% respectively. This is mentioned in “Appendix A”

Further analysis is done in respect of Ordinary least squares of Regression on the PAC contribution with sample size will discuss in the heading of the Population. This analysis is shown in the appendix file with calculation of Means, Standards Deviations, median and Quarter deviations. This analysis is done in the respect of TOTPAC, COMMITTEE, TOP5, OTHER, %sales, PY_TOTPAC and PY_COMMITTEE. These all are the contributions of the term selected from the PAC results of the House. This analysis is mentioned in the “Appendix B”

Move toward the next analysis, which is Pearson Pair wise Correlations with calculation of same term which depict in the above paragraph. Basically, it shows the relation between the contributions in respect to the house. These are the crucial things in maintaining the multiple variables in every aspect. There is the negative correlation between TOP5 and PY_TOTPAC which means is marginally significant for the contribution indicators.............

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