Employee stock options (ESOs) usually constitute a wealth transfer from current shareholders to prospective shareholders (employees) and have no effect on total liabilities and shareholders' equity.

Question

Quizplus · Accepted Answer

ESOs do not affect total liabilities or shareholders' equity because they are not considered a liability or equity instrument. Instead, they are a form of compensation that gives employees the right to purchase shares of the company's stock at a predetermined price.

Employee Stock Options (ESOs) Usually Constitute a Wealth Transfer from Current