Public companies may face a major headache related to implementing the revised rules on accounting for stock options, according to executive compensation experts. The issue stems from the determination of the grant date used in accounting for employee stock options, which must be expensed under a Financial Accounting Standards Board rule issued last December.
Under language in FASB’s expensing standard, the date the options are approved by a company’s board of directors would not necessarily be the grant date. Under the Board’s definition in FAS 123(R), the grant date is the date at which an employer and an employee reach a mutual understanding of the key terms and conditions of a share-based payment award—in other words, the date the award is communicated to the employee (see FASB definition of grant date and its basis for conclusions in box, below left).
