Companies seem to be making assumptions about stock option valuations roughly in step with market reality when it comes to interest rates and stock volatility, even as many take the easy route to calculate options’ value—and their effect on the corporate balance sheets.
Those are the findings gleaned from a Compliance Week analysis of 50 companies with revenues exceeding $20 billion that filed their 2005 annual reports recently. This spring is the first proxy season where companies must comply with Financial Accounting Statement 123R, requiring them to deduct the value of stock options from corporate earnings. FAS No. 123R does, however, give companies the choice of several accepted valuation methods to establish a fair market value for the illiquid securities.
