Letter Summarizes SEC Views on Stock Options

The Office of the Chief Accountant of the Securities and Exchange Commission (SEC) on Tuesday issued a public letter to the accounting industry summarizing the staff’s views regarding the 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 the past stock option grants in a way that benefits investors and the capital markets,” SEC Chief Accountant Conrad Hewitt said in a statement.

Prior to the adoption of the Financial Accounting Standards Board’s (FASB’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. This 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 letter, in response to the ongoing backdating scandal, clearly states that it has not been approved by the Commission.

More than 100 companies have publicly stated or acknowledged being involved in investigations of options granting practices. Several executives have resigned or been removed in association with options investigations. William Ruehle, chief financial officer (CFO) of Broadcom Corp. since 1997, according to EE Times, stepped down abruptly on Tuesday, less than a month after the company announced that it would restate finances for 2000 through the first quarter of 2006. Also on Tuesday, Reuters reports that the board of directors of Monster Worldwide Inc. suspended Myron Olesnyckyj, senior vice president, general counsel and secretary, effective immediately, pending the results of a review of the company’s stock option grant practices. Monster said it may restate financial statements for the year ending December 31, 2005, as well as prior years, however, these restatement would not materially affect 2006 earnings.

You may like these other stories...

IRS must take oath on Lerner emails: judgeMackenzie Weinger of Politico reported on Thursday that a federal judge ordered the IRS to explain under oath how it lost emails connected to Lois Lerner, the ex-IRS official at the...
Credit Suisse says pension assets at risk unless court delays sentencingJohn Letzing of the Wall Street Journal reported on Wednesday that Credit Suisse Group AG says its management of billions of dollars in assets for...
The prospect of International Financial Reporting Standards (IFRS) being fully adopted in the United States in the near future are growing less likely, as the Financial Accounting Standards Board (FASB) and the International...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.