ebay financial reporting
eBay Corporation: Financial Reporting
The current market trend in the American business world shows that many businesses are making the switch to the fair market value of accounting for employee stock options. The Journal of Accounting Research defines fair market accounting as accounting for the fair value, or price, of an asset or liability based on the current market price of that asset or liability, or for similar assets and liabilities, or based on another objectively assessed "fair" value (Riedl and Serafeim, 2011, p. 1083). In understanding this concept fully, one can then assess its role within specific businesses' financial decisions -- in this case, eBay.
Ethical and Financial Considerations
Footnote disclosure is a widely-used system of financial reporting, which has brought about instances of ethical questioning in past years since its introduction within eBay's reporting protocol. The introduction of backdated accounting disclosure in the form of footnotes caused an instance of ethical dilemma within eBay in 2000. This new accounting disclosure required that companies report what earnings would have been had they been in compliance with fair value stock option expensing. Upon disclosing this old material in a new format, it was gauged that in 2000, eBay reported a "net profit of $48 million," when in reality it should have "reported a loss of almost $91 million" (Bradshaw, 2005, p.1). This brings about a massive breach in ethics in terms of reporting. In a company where employees were regarded as "key risk factors," fluctuations in stock prices into "extremely volatile" zones brought about the threat of employee departure (Bradshaw, 2005, p.2-3).
Plans of reporting were then employed to attract and motivate employees and the amount of shares reserved for these employees...
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