I see a lot of discussion about expensing stock options here. So I thought this may be interesting. With these guidelines, i am not sure FASB wants to expense stock options or not.
Message 17875687
online.wsj.com.
FASB Proposes Three Methods
For Expensing Stock Options
By CAROL S. REMOND
DOW JONES NEWSWIRES
NORWALK, Conn. -- The board that sets the nation's accounting standards proposed new rules guiding how companies can expense employee stock options.
The Financial Accounting Standards Board decided to put together draft guidelines, likely to become public in September, that would give companies choosing to expense stock options three alternatives to replace the one they now have.
WEIGHING THE OPTIONS
See an infographic detailing the alternatives under consideration for expensing employee stock options.
Also, track the growing list of companies that are volunteering to expense stock options.
After a 30-day comment period, the new rules are expected to take effect by Dec. 15.
Under the FASB guidelines, companies will have the following three alternatives to choose from:
• The existing "clean slate" method, which allows companies to expense options granted since the beginning of the fiscal year in which they decided to begin expensing options.
• An alternative under which companies would expense new options at the beginning of the fiscal year in which they made the switch AND the unvested portion of previous awards.
• A retroactive restatement alternative under which companies would have to restate three years of prior statements to reflect options granted during those years, as well as unvested options granted in previous years.
Until recently, few companies opted to account for stock options as an expense, as it reduces earnings. But calls for increased transparency in the wake of a number of accounting scandals have led more companies to announce that they would begin to expense options.
The standard now under consideration by the FASB would continue to give companies the choice between expensing the fair value of the stock options using the three different alternatives available, or disclose their theoretical value in the footnotes of their financial reports.
The board had contemplated at its last meeting to move the information containing the footnotes to the income statement, but decided Wednesday that it wouldn't be possible.
Instead, the board decided that it would now require the pro forma net income and earnings per share information contained in the footnotes to be disclosed quarterly instead of once a year in the company's annual report.
Write to Carol S. Remond at carol.remond@dowjones.com |
