As such, when an executive resigns and forfeits on his stock before vesting, the financial statements will reflect this situation. On the one hand, the stocks would be registered as new equity. On the other hand, they would be presented to the other stakeholders -- already existent ones or new ones -- and these would be able to purchase them. In other words, changes would be operated at the level of capitals and equity.
4. If options are allowed to lapse after vesting, what is the effect on the financial statements?
Firms will often intentionally let their stock options suffer devaluations either because they do not wish to interfere within the market and they maintain their objectivity, either because they have a direct interest. In the first scenario, the underlying process of thought is that the market would correct itself after the vesting has been adequately integrated. In the second scenario however, the most common rationale is that the company desires to repurchase part of its shares in order to reduce its debt to the shareowners.
This change is also revealed within the financial statements, in the sections dedicated to borrowed capitals, where changes would be operated to state the value of the lapsed shares, as well as their volume. The specifics depend however on the reporting style of each firm. BT Plc. uses the following reporting style:
Source: Website of BT Plc.,...
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