Accounting Research Essays

1367 Words 6 Pages
Understanding Different Types of Compensation and the Benefits
Rondricka Jefferies
September 19, 2012
ACG 4111

There is a wide range of different types of compensation and other benefits. This paper will focus on three of many, Share based compensation to include stock options and restricted stock, Base Compensation and Pension Plans. Throughout this research project; there will be observance of the accounting treatments and disclosures along with the benefits, advantages and disadvantages to employees, share holders and investors. This will allow and develop a better understanding as to why compensation and other benefits are so important to employers, employees and shareholders.

Understanding Different Types of
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Startup companies tends to use stock options, while established companies may use options, restricted stock and other share base methods; which we will get a better understanding of next.
There is two types of common shard based compensation restricted stock and stock options. Stock options give shareholders the right to exchange shares at prearranged prices before the dates of the stocks expire. Most of the times there is a vesting period which usually lets an employee know when they can exercise their options and how much is available to vest. Share based compensation must take into account and apply applicable laws when it comes to the accounting process. It’s up to senior management and executives to disclose security registration and regulatory disclosures to the appropriate agencies. Securities transactions must be disclosed and trading of shares is granted at specific times in a quarter.
Like with the majority of things, there are advantages and disadvantages to share based compensation. The benefit and advantage to management and employees is that they can share in the growth of the company’s stock prices, if structured properly these stock options can support shareholder and employees interest without touching the company’s cash reserve. Most employees working for lower salaries intend on cashing in later when stock prices increase.

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