GAAP and IFRS

SEC Expected to Delay Options Expensing

As early as next week, the Securities and Exchange Commission will reportedly push back the effective date of FASB Statement 123R.
Stephen TaubApril 14, 2005

It appears that most companies will get another six months before they must begin expensing the value of stock options.

The Wall Street Journal reported that as early as next week, the Securities and Exchange Commission will push back the effective date of Statement 123R, the Financial Accounting Standards Board’s revised rule on expensing options, which affect all stock-based compensation.

FASB’s current effective date, which has been pushed back once already, calls for most public companies to expense options beginning with fiscal quarters starting after June 15 — that is, during the quarter ending September 30. According to the Journal, the SEC staff has recommended changing the effective date to fiscal years starting after June 15. Companies operating on a calendar-year basis would not need to expense options until the March 2006 quarter.

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Companies would still be allowed to voluntarily adopt the new rules before the deadline, the paper pointed out. Indeed, earlier this month International Business Machines Corp. announced that it will begin to expense equity compensation when it reports its first-quarter 2005 financial results on April 18.

IBM added that in order to provide a consistent year-to-year comparison of financial results, it will also restate prior financial results to reflect the impact of share-based compensation expenses.

SEC Chairman William Donaldson and the other four commissioners, as well as key staff members including chief accountant Donald Nicolaisen and Alan Beller, director of the SEC’s division of corporation finance, support the delay.