Exploring the relatively recent controversy dealing with accounting for stock options, which involved, essentially, debate over whether stock option compensation should be recognized as an expense, this paper examines what many accountants refer to as “the great debate,” attempting to show that the stock option controversy taking place around the turn of the 21st century is significant because it strengthened the accounting profession’s commitment to its conceptual framework. Beginning with an overview of this theoretical structure, this paper emphasizes the accounting profession’s overarching objective before introducing stock options and the intention behind their use as a form of executive compensation. It then describes why the use of option compensation exploded in the 1990s, providing context for its discussion of the controversy. After delving into the arguments and counterarguments characterizing the debate, it traces the controversy’s development, noting a temporary compromise with an accounting standard recommending, but not requiring, the expensing of option compensation and relating the events that led to the controversy’s ultimate resolution with the revision of that standard to mandate expensing. Finally, it addresses the effects of and responses to this revised standard, concluding with a peek into the future as it considers the outlook for option compensation and the important precedent the great debate set for the accounting profession.

Semester/Year of Award

Spring 2016


Kelly Myers

Mentor Professional Affiliation

Grant Thornton LLP

Access Options

Restricted Access Thesis

Document Type

Bachelor Thesis

Degree Name

Honors Scholars

Degree Level



Accounting, Finance, and Information Systems