FASB Comment Letters - Dell
Group Case – FASB Comment Letters
Dell Company
FASB wants to institute a new regulation on the financial statements about the share-based payment, and for these procedure the organization releases on its webite an exposure draft on the subject. One of the reasons for sharing this information is to enhance the proposed techniques through collaboration of companies and / or individuals in the accounting area.
Dell, an IT company that registered $2,37 billion net income in 2013, was one of the companies that contributed with the evaluation of the purposed standards by FASB for the share-based payment. The position that Dell took was one of acceptance of efforts to develop a regulation to more accurately value and report the impact of employee’s stock options in financial statements. Nonetheless, Dell has a few reservations about illogical and impractical approaches proposed by the board.
The company believes that stock options award should be regarded as compensation; however this understanding should not be exposed as an expense to the company, once this type of compensation is related to an equity distribution rather than using the company’s assets. Concerning the fair value, Dell does not agree with the presented methods of how to measure the fair value. For example, the lattice model would interfere with the understanding of the subject by the user of financial statements.
Another disagreement between FASB proposal and Dell believes is related to the method of accounting for income taxes. Dell brings to discussion both, theoretical and impractical reasons that not support this statement idea. It seems illogical to classify the tax effects of movements in stock price after grant date as expense if a shortfall, versus equity if a benefit, defective tax rate in the income statement should align with the expense recognized in accordance with the matching principle. Furthermore as a practical matter, it would require significant capital investment to
Dell Company
FASB wants to institute a new regulation on the financial statements about the share-based payment, and for these procedure the organization releases on its webite an exposure draft on the subject. One of the reasons for sharing this information is to enhance the proposed techniques through collaboration of companies and / or individuals in the accounting area.
Dell, an IT company that registered $2,37 billion net income in 2013, was one of the companies that contributed with the evaluation of the purposed standards by FASB for the share-based payment. The position that Dell took was one of acceptance of efforts to develop a regulation to more accurately value and report the impact of employee’s stock options in financial statements. Nonetheless, Dell has a few reservations about illogical and impractical approaches proposed by the board.
The company believes that stock options award should be regarded as compensation; however this understanding should not be exposed as an expense to the company, once this type of compensation is related to an equity distribution rather than using the company’s assets. Concerning the fair value, Dell does not agree with the presented methods of how to measure the fair value. For example, the lattice model would interfere with the understanding of the subject by the user of financial statements.
Another disagreement between FASB proposal and Dell believes is related to the method of accounting for income taxes. Dell brings to discussion both, theoretical and impractical reasons that not support this statement idea. It seems illogical to classify the tax effects of movements in stock price after grant date as expense if a shortfall, versus equity if a benefit, defective tax rate in the income statement should align with the expense recognized in accordance with the matching principle. Furthermore as a practical matter, it would require significant capital investment to