On January Chancellor Kathaleen McCormick of the Delaware Court of Chancery, struck down Elon Musks multibilliondollar pay packageLinks to an external site. at Tesla NASDAQ: TSLALinks to an external site. after finding the process for securing its approval deeply flawed. New media used titles such as Elon Musks $ Billion Tesla Pay Package Struck Down by JudgeLinks to an external site. when reporting on the lawsuit. Musks pay package in question, which consisted of tranches of stock options, has fully vested, though he has yet to exercise any of those options. Shareholders voted overwhelmingly in favor of the package in For all the options to vest, Teslavalued at less than $ billion at the timeneeded to reach a market capitalization of at least $ billion while also hitting various revenue and profit targets. The company cleared the last of those hurdles in

Equity securities such as stocks and stock options have been used in executive compensation packages for a long time in the US Before FASB revised SFAS R in stock options were usually measured at intrinsic value, which resulted in very little to no compensation expense recognized in the companys financial statements. SFAS R required companies to use fair value to measure options and recognize compensation expense during the service period.

In this individual writing assignment, you are asked to write a report of up to pages using Word, doublespaced, size Times New Roman font, to address the following required questions about the accounting for stockbased compensation. Your report should reflect your own research and writing. At the end of your report, you need to provide a list of references used, including generative AI apps such as ChatGPT and Gemini, which does not count toward the page limit You may also include any exhibits or graphs in an Appendix, which also does not count toward the page limit

Required:

Briefly describe stock options as used in executive compensation. Why would a company use stock options to pay its executives and employees? Which features of stock options may make them challenging to accountants? Explain.

Briefly summarize the current accounting practice for employee stock options. Which topics and subtopics in the FASB Accounting Standards Codification ASC apply to stock optionbased compensation? Include numeric citations of the ASC in your discussion.

Describe the effects Elon Musks pay package has had on Teslas income statements between and You should consult Teslas SEC filings including Ks and proxy statements, for the years affected.

Assume you were a shareholder of Tesla in early would you vote in support of the pay package? Why or why not? Explain.

Assume you were a shareholder of Tesla in early would you support the Delaware courts decision to void Elon Musks pay package? Why or why not? Explain