FASB Proposes Changes in Accounting For Stock Options

The Financial Accounting Standards Board (FASB) has issued an exposure draft of proposed changes to Financial Accounting Standard (FAS) 123, "Accounting for Stock-Based Compensation."

The proposed changes would:

  • Provide three alternative methods of transition for companies that voluntarily decide to expense stock options using the fair value method.

  • Require clearer and more prominent disclosures about the cost of stock-based employee compensation and increase the frequency of these disclosures to include publication in quarterly financial statements.

If adopted as proposed, the amendment to FAS 123 would be effective immediately upon issuance. The proposed disclosures for annual financial statements would be required for fiscal years ending after December 15, 2002. The proposed disclosures for interim financial information would be required as of the first interim period beginning after December 15, 2002, with earlier application encouraged.

Download a copy of the exposure draft. Comments are due by November 4, 2002.


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