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This research examines whether the FASB's requirement that firms measure and disclose stock option expense in the financial statement notes improves earnings quality. Arguments have been made that discretionary accruals damage earnings quality. Although there is no consensus on how to define earnings quality, we define it herein as the degree of association between earnings and future net operating cash flows, a definition that has a reasonable degree of support in the literature. We utilize a multiple regression methodology. Total assets are employed to control for the effect firm size has on net operating cash flows. Pre-stock option expense earnings are used to explain variations in future net operating cash flows prior to considering the impact of stock option expense. Stock option expense is added to the regression to evaluate whether it provides incremental earnings quality in the explanation of future net operating cash flows. The stock option expense variable is found to be extremely statistically significant in explaining future net operating cash flows. Accordingly, we conclude that stock option expense provides incremental earnings quality. Keywords: Stock option expense, earnings quality, discretionary accruals, operating cash flows., 1. INTRODUCTION SFAS No. 123: Accounting for Stock-Based Compensation was issued in 1995 and became effective in 1996 (Financial Accounting Standards Board, 1995). This standard was the culmination of a [...]

Recommendations to restructure the Australian Accounting Research Foundation's (AARF's) Statements of Accounting Concepts No.2 (SAC 2), guidelines to financial reporting are presented. SAC 2 guide lines cause ambiguity because of few inconsistent objectives.

The ambiguities inherent in the Russian bankruptcy and insolvency machinery are quite conducive to the corruption that plagues the system. Insolvency legislation in Russia and the various factors of corruption in the implementation of the procedures of financial rehabilitation are discussed.

The next time you speak to your investment adviser, ask (1) when you'll have to start withdrawing funds from your traditional IRA, and (2) whether investing in different asset classes [...]

Check our exclusive list of the nation's top money pros. One may speed you on the road to prosperity All advisers listed have earned the CFP (Certified Financial Planner) designation, [...]

Byline: ERIC HOOVER This summer Arlene Ingram, director of guidance and college counseling at CapeHenry Collegiate School, in Virginia Beach, got a call from a student whose family had just [...]

Achieving Service Excellence in the Financial Services Industry Today, more then ever, service quality is recognized as the true measure of organizational excellence in the financial services industry. Once considered [...]

Your three-digit credit score, the primary indicator of creditworthiness, helps determine your loan or credit card interest rate, and even your insurance premiums. Lenders and the three major credit bureaus--Equifax, [...]

Information regarding the overhaul to inspections in the CPA industry is given. The comprehensive performance assessment system will undergo major reform to address cost cutting issues.