The Office of the Chief Accountant of the Securities and Exchange Commission on Tuesday issued a letter summarizing the department’s views regarding accounting for stock options in the historical financial statements of public companies.
“The views expressed in this letter will assist in the resolution of accounting issues that have been raised during reviews of past stock option grants in a way that benefits investors and the capital markets,” announced SEC Chief Accountant Conrad Hewitt.
Prior to the adoption of the Financial Accounting Standards Board’s Statement No. 123 (revised 2004), “Share-Based Payment,” many public companies accounted for stock options under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.”
The letter discusses the accounting consequences under Opinion 25 of dating an option award to predate the actual award date, option grants with administrative delays, uncertainty as to the validity of prior grants, and other related circumstances.
The full text of the SEC Chief Accountant's letter providing guidance on the treatment of stock options can be found in the Tax News Resources section.
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