In an apparent attempt to quiet the frenzy over stock option accounting problems, the chief accountant of the Securities and Exchange Commission issued an open letter last week to address a variety of issues companies are hitting as they cull through their historical records.
Foremost, the guidance points out that Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees—long the rule of the day on stock options, until its successor Financial Accounting Standards Board issued more recent rules—requires companies to determine compensation costs for option grants by starting with the measurement date. That is the first date when the company knows both the number of shares that an individual employee is entitled to receive and the option or purchase price, if any.
