Employee Stock Option Accounting -- Financial Reporting Alert

FASB Statement No. 123(R), SEC Staff Accounting Bulletin No. 107, Other Recent Authoritative Developments

The new and controversial accounting rules governing stock option accounting will have a significant effect on many corporations and the financial markets. The rules and the issues that surround them are complicated and difficult to understand for many. This Financial Reporting Alert explains the accounting for employee stock options ("ESOs") by describing the new accounting rules (FASB Statement No. 123 (revised 2004), Share-Based Payment), summarizing SEC Staff Accounting Bulletin No. 107, and supplementing this knowledge with additional information developed by the capital markets and the accounting field. Moreover, this Alert discusses the controversy behind stock option expensing. Among the many topics covered in this publication are:

• What are employee stock options?
• Specific accounting rules for ESOs
• What are the likely effects of FASB's new accounting rules?
• What is the value of a stock option?
• How can stock option expense be minimized?

Intended for accountants and non-accountants, this Alert will help CPAs, auditors, financial managers, corporate board members, audit committee members, teachers, students, and others gain a solid grip on the topic of stock option accounting and gain a solid understanding of the controversial issues that surround the new rules.