Share-based compensation are avenues used to give employees equity rights into a company. There are two types: stock options and restricted stock. The reasoning for employees to have share-based benefits, according to Basu (2014), “is that if they all have a stake in the value of the company’s shares, they may try harder to drive sales, profits and other financial metrics that investors and research analysts look for in stocks” (para. 1).
One of the main disadvantages are the company carry the risk whereas the employee carries little to no risk (Basu, 2014).
Share-based payments fall under FAS 123R. This reads that share-based payments should be valued using the fair-value-based method (FASB, n. d).
According to FASB 123(R) (n. d. ) “By requiring the fair-value-based method for all public entities, this Statement eliminates an alternative accounting method; consequently, similar economic transactions will be accounted for similarly” (para. 4).
Special purpose entities or SPEs are defined by Crawford and Fredericks (2003) as “A separate legal structure created by a firm to provide liquidity and/or obtain favorable external funding” (para. 4).
SPEs are often used to reduce larger risk by corporations. These structures assist corporations to obtain financing as well as assets. It appears that with this rule, share-based payments cannot be part of a special purpose entity. consolidation theory is the special purpose entities that can apply to private or public companies. Consolidation theory has an ownership interest, contractual relationship, and other business relationship with special purpose entity. Consolidation has two theory parent and entity theory. The parent theory is a proprietary interest in the net assets of the consolidated group.
The Term Paper on The Theory of special relativity
Abstract: Prior to albert Einstein’s theory of special relativity there was always an idea about relativity. Through Galilean transformations, which worked perfectly with the newton’s laws of motion, people had formed a vague idea that all motion in this world is relative to something else. There came up the mysterious thing called aether — the medium through which light propagated. The belief in ...
The purpose of this consolidation statement is providing information to the stockholders of the parent company. The parent theory can only take in account when the parent company shares of the subsidiary income. The parent consolidation theory has the positive and negative parts of the entities. The parent consolidation theory only takes place when non-controlling interest is present. The entity theory is the consolidation where the entity separate from the owners. Under the entity theory, controlling shareholders and non-controlling shareholders are equal as one.
Entity is the interest assets of the business after deducting all of the liabilities. A special purpose entity is referring as off-balance-sheet arrangement. SPE does not engage in a business transaction other than the ones they created. SPE have sponsors to back up the transaction. SPE can lower the interest rate of a transaction for the sponsors. Sponsors benefits from special purpose entity by using the off-balance-sheet in two different ways. SPE can protect sponsors from financial failure and remove debt from the balance sheet to meet the ratio covenants.
