We examine the differences in the use of discretionary accruals between firms with in-the-money stock options and firms with out-of-money (i.e., underwater) stock options over a longer time horizon. We contend that management anticipating action from the board of directors may use less (more) positive (negative) discretionary accruals to decrease earnings and stock price prior to the decision of the board of directors to re-price options. Our results are consistent with our expectation. Our finding implies that the status of stock options provides incentives for management to time the reversal of discretionary accruals for future wealth increases from the exercise of stock options.