Discussion: "Stock Option Plans and The Issuance of Debt"
Please respond to the following:
1. Compare the two main accounting issues associated with stock option plans. Make one recommendation to FASB for overcoming obstacles in accounting for stock option plans. Provide one specific example of the way in which your recommendation could improve the accounting for stock option plans.
2. Suppose management is in need of large sums of cash to finance the construction of a new manufacturing plant and is considering issuing debt to obtain the cash. However, management is unsure of whether to issue convertible debt or debt issued with stock warrants. You are the senior accountant at your company, and management has asked for your help. Explain the similarities and differences between convertible debt and debt issued with stock warrants. Also, recommend to management the type of debt which it should issue. Provide a rationale for your recommendation.