Growth Corporation offered the following stock option plan to its employees: Each employee will receive 1,000 options to purchase shares of stock at an option price equal to the market price of the company’s common shares on the grant date, January 1, 2013. On that date,

The market price per share was.......... $ 22

The fair value of an option was..........  $   3 

Required: 

a. Describe how the ESOPs would have been reported under the provisions of APB Opinion No. 25. 

b. Analyze and explain the consequences of the APB Opinion No. 25 accounting treatment. Your analysis should consider the following:

i. The conceptual framework

ii. Any ethical implications

iii. The impact on financial statements

iv. The impact on financial ratios

c. The FASB now requires companies to use the fair value method of accounting for ESOPs as described in FASB ASC 718. Describe how the ESOPs will be reported under this method.

d. Analyze and explain the consequences of using fair value to measure and report the ESOPs. Your analysis should consider the following:

i. The conceptual framework

ii. Any ethical implications

iii. The impact on financial statements  

iv. The impact on financial ratios