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Title:Accounting for stock-based compensation: an extended clean surplus relation PDF Logo
Authors:Hess, Dieter E.
Lüders, Erik
Issue Date:2001
Series/Report no.:ZEW Discussion Papers 01-42
Abstract:Residual income valuation is based on the assumption that the clean surplus relation holds. As pointed out by Ohlson (2000), among others, the standard clean surplus relation is frequently violated. Moreover, standard residual income valuation models rest on the implicit assumption that future stated earnings belong to current shareholders only. This is clearly invalid for companies granting employee options. In order to overcome these deficiencies, this paper establishes an extension of the clean surplus relation and derives simple analytical solutions for the value of outstanding stocks in terms of already known accounting information.
Subjects:Residual income valuation
clean surplus accounting
US-GAAP
employee stock option programs
JEL:G12
M41
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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