The Standard

Under SFAS No. 123(R), all forms of stock compensation are treated as an expense to the company - This includes non-qualified stock options, employee stock purchase plans, restricted stock awards and units, phantom stock, stock appreciation rights and any other compensatory arrangements that involve company stock. Companies have been required to comply with the standard beginning in their fiscal years after the Spring of 2005.

Soon after its issuance by the FASB in December 2004, many organizations and industry professionals debated if the standard would result in the elimination of employee options altogether – many years later we see overall that the issuance of employee stock options is not significantly different than what it was in a pre-FAS123R world. Instead, companies are spending time thinking about what the best strategy is to address the challenges of FAS 123R and optimize their option plans.

What is an effective FAS 123R strategy?

Companies that develop an effective FAS 123R strategy are not only able to generate the information that they need to disclose on their financial statements but are also able to provide information and explanations to key stakeholders related to the options expense and the reporting process.

Five key areas comprise any company’s FAS 123R strategy: click here for more