FASB Changes Options Accounting Rules on Amortization

Responding to criticism, the FASB has changed its approach to vesting issues when accounting for stock options. In FASB's exposure draft on options accounting, options with graded vesting would be treated as if employers had issued multiple awards. An expense would be recorded for all vesting increments at the same time, starting from the date of grant, rather than recording an expense for each increment sequentially. Critics said the result would be to move more of the expense to current expenses rather than over the life of the award. On August 19, however, the FASB changed course, reverting to the guidance under FAS 123, which allowed companies the choice to recognize the awards on a straight-line basis.