FASB Issues Exposure Draft on Accounting for Stock Options, Amends Transition and Disclosure Provisions

Norwalk, CT, October 4, 2002—The FASB has issued an Exposure Draft, Accounting for Stock-Based Compensation—Transition and Disclosure, that would amend FASB Statement No. 123, Accounting for Stock-Based Compensation. The purpose of the proposed amendment is twofold:


  • To enable companies that choose to adopt the preferable fair value based method to report the full effect of employee stock options in their financial statements immediately upon adoption.
  • To make available to investors better and more frequent disclosure about the cost of employee stock options.


The proposed changes would provide three methods of transition for companies that voluntarily adopt the fair value method of recording expenses relating to employee stock options. In addition, the FASB proposes clearer and more prominent disclosures about the cost of stock-based employee compensation and an increase in the frequency of those disclosures to include publication in quarterly financial statements. Currently, companies are not required to present stock option disclosures in interim financial statements.

The FASB plans to issue the amendment to Statement 123 by the end of this year and its provisions would be effective immediately upon issuance. The proposed disclosures to be provided in annual financial statements would be required for fiscal years ending after December 15, 2002. The proposed disclosures to be provided in interim financial information would be required as of the first interim period beginning after December 15, 2002, with earlier application encouraged.

A copy of the Exposure Draft is available on the FASB’s website at The comment period concludes on November 4, 2002.

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