Integrating research and practice in accounting education: The case of executive stock options

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.