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A review of accounting textbooks indicates that most have not addressed the compelling arguments for including stock compensation plans in the calculation of compensation expense. This article relies on accounting theory to evaluate the recent FASB exposure draft dealing with stock-based compensation. Evaluating current coverage of ESOs in intermediate accounting texts supports the need for supplementary materials in this area that can be used as a teaching resource in accounting theory courses. This additional coverage, we argue, should include generating estimated values for ESOs and reinforcing the importance of statistical measures in valuation issues faced by accountants today. To enhance this understanding, a teaching pedagogy is developed which supports the measurement of economic value of ESOs reported in financial statements and attempts to articulate the need for a more theoretical discussion of these valuation issues in accounting theory classes.

Abstract The exclusive use of discounted cash flow (DCF) capital budgeting models is being criticized because of the inability of these models to handle qualitative/intangible benefits and tie the capital budgeting decision formally to organizational strategy. In response, several authors have recently proposed the use of Saaty's Analytic Hierarchy Process (AHP) for capital investment analysis. This paper extends that line of research by focusing on the fundamental problem of structuring the decision hierarchy appropriately so that the AHP can be implemented successfully in a capital budgeting context. Three approaches are presented for structuring AHP hierarchies, including the Mission, Objectives, and Strategy (MOS) framework for strategic planning. An example based on three actual companies in the petrochemical industry is developed using the MOS approach.