SEC Office of the Chief Accountant Issues Guidance on Accounting for Stock Options

Partly in response to recent controversies regarding option grant practices, the Office of the Chief Accountant (the "OCA") of the Securities and Exchange Commission issued a letter earlier this month summarizing its views regarding the accounting for stock options in the historical financial statements of public companies. Prior to the adoption of Financial Accounting Standards Board ("FASB") Statement No. 123 (revised 2004), "Share-Based Payment" ("Statement No. 123R"), most public companies accounted for stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("Opinion 25"). The OCA letter discusses the accounting consequences under Opinion 25 of a variety of circumstances related to prior award grants.