Maxim Integrated Products, Inc
Case: 9-4. Maxim Integrated Products, Inc.
Problem Statement:
Maxim Integrated Products, Inc. along with other organization has implemented expensing employee stock options as required by FASB Statement 123(R). The issue presented is whether expensing employee stock options under fair value rules accurately reflect the company’s true financial condition and what would be an appropriate way to assess the company’s performance when valuing the its stock.
Case Data Maxim Integrated Products, Inc. designs, develops, manufactures, and markets a broad range of linear and mixed-signal integrated analog circuits. It. granted stock options to its employees in order to give them the right to buy a specific number of shares of the company stock at the price the company specified at the time of employment. This is a form of compensation made my Maxim that enabled them to keep their financial performance and to attract top notch engineers employees by offering compensation that goes beyond one’s salary. Stock option compensation is important for Maxim as it attracts and retains top qualified employees and help to boost the company’s productivity. In addition, by using stock option compensation Maxim maximizes the value to its shareholders by reducing the expense for employee compensation. Under the new rules the company won’t be able to reduce the expense for employee compensation as it will be required to expense the options. The new requirements would have an effect on the way employees are compensated but will still remain a primary motivational and recruiting factor for most high-tech companies. Any changes in the form of compensation would still need to be expensed whether it is cash based or restricted stock grants and should not have a significant effect on the net income. In the past the company had expensed employee stock options using the intrinsic value method, which recognized stock options compensation costs as the difference between market and exercise
Problem Statement:
Maxim Integrated Products, Inc. along with other organization has implemented expensing employee stock options as required by FASB Statement 123(R). The issue presented is whether expensing employee stock options under fair value rules accurately reflect the company’s true financial condition and what would be an appropriate way to assess the company’s performance when valuing the its stock.
Case Data Maxim Integrated Products, Inc. designs, develops, manufactures, and markets a broad range of linear and mixed-signal integrated analog circuits. It. granted stock options to its employees in order to give them the right to buy a specific number of shares of the company stock at the price the company specified at the time of employment. This is a form of compensation made my Maxim that enabled them to keep their financial performance and to attract top notch engineers employees by offering compensation that goes beyond one’s salary. Stock option compensation is important for Maxim as it attracts and retains top qualified employees and help to boost the company’s productivity. In addition, by using stock option compensation Maxim maximizes the value to its shareholders by reducing the expense for employee compensation. Under the new rules the company won’t be able to reduce the expense for employee compensation as it will be required to expense the options. The new requirements would have an effect on the way employees are compensated but will still remain a primary motivational and recruiting factor for most high-tech companies. Any changes in the form of compensation would still need to be expensed whether it is cash based or restricted stock grants and should not have a significant effect on the net income. In the past the company had expensed employee stock options using the intrinsic value method, which recognized stock options compensation costs as the difference between market and exercise