Financial Reporting: Implementation of FASB Statement No. 123 R
March 2006
Financial
Reporting
This Financial Reporting letter was prepared and distributed by BDO Seidman, LLP to help our clients anticipate and respond to questions that may arise in connection with the implementation of
FASB Statement No. 123 (Revised 2004),
Share-Based Payment.
Contents:
What is the scope of Statement 123(R)?
What plans does it cover?...............................3
Is the plan compensatory for financial accounting purposes? .....................................3
Does the plan create equity interests or liabilities? .........................................................4
If the plan is compensatory, when is compensation measured? ..............................5
If the plan is compensatory, how is compensation measured? ..............................6
Comparison of lattice model with closed-form model .........................................7
How is the expected volatility of the stock price estimated?...............................................8
How is the expected term of the options estimated? ........................................................9
How are restrictions on shares or options considered? ....................................................10
If the plan is compensatory, over what period is compensation recorded?..............10
What is the impact of service, performance and market conditions? ................................12
What about nonvested and restricted shares? ............................................................15
How are modifications of grants treated? .....15
How are changes in estimates treated?..........16
How are income tax benefits accounted for? 17
How are cash flow statements affected? ........20
How are EPS computations affected?.............20
What are other implementation issues to consider?.........................................................21 What are issues that private and small public companies should focus on?............22
What
Financial
Reporting
This Financial Reporting letter was prepared and distributed by BDO Seidman, LLP to help our clients anticipate and respond to questions that may arise in connection with the implementation of
FASB Statement No. 123 (Revised 2004),
Share-Based Payment.
Contents:
What is the scope of Statement 123(R)?
What plans does it cover?...............................3
Is the plan compensatory for financial accounting purposes? .....................................3
Does the plan create equity interests or liabilities? .........................................................4
If the plan is compensatory, when is compensation measured? ..............................5
If the plan is compensatory, how is compensation measured? ..............................6
Comparison of lattice model with closed-form model .........................................7
How is the expected volatility of the stock price estimated?...............................................8
How is the expected term of the options estimated? ........................................................9
How are restrictions on shares or options considered? ....................................................10
If the plan is compensatory, over what period is compensation recorded?..............10
What is the impact of service, performance and market conditions? ................................12
What about nonvested and restricted shares? ............................................................15
How are modifications of grants treated? .....15
How are changes in estimates treated?..........16
How are income tax benefits accounted for? 17
How are cash flow statements affected? ........20
How are EPS computations affected?.............20
What are other implementation issues to consider?.........................................................21 What are issues that private and small public companies should focus on?............22
What