SEC issues two new SABs

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By Linda Cavanaugh, CPA - In November and December, the SEC issued two new Staff Accounting Bulletins No. 109 and 110.

Staff Accounting Bulletin 109 "Written Loan Commitments Recorded at Fair Value through Earnings"

In November 2007, SEC issued SAB 109 – an Amendment to SAB 105. SAB 109 rescinds SAB 105 and allows the expected net future cash flows related to the associated servicing of a loan to be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. This reversal of SAB 105 is consistent with the new guidance in FAS 156 and FAS 159.

Staff Accounting Bulletin 110 "Valuation of Employee Share Option Grants"

In December 2007, SEC issued SAB 110 - an Amendment of SAB No. 107. SAB 110 states, that the staff will continue to accept, under certain circumstances, the use of the simplified method for estimating the term of plain vanilla stock options beyond December 31, 2007. The simplified method allows entities to determine the expected term of plan vanilla stock options byusing the formula "vesting term + original contractual term)/2". When issuing SAB 107, the SEC staff felt that sufficient information would be available by December 2007 for entities to model expected term based on market or internal data. The Staff acknowledges that this information has not become available and has decided to allow the simplified method indefinitely.

These two SABs did not affect my company. Please let me know if they affected yours and if they caused a last minute crisis for year end.


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