IASB Develops Tentative Guidelines on Measurement Dates for Stock Options Accounting

The International Accounting Standards Board (IASB) has made further progress in developing proposals on accounting for stock options. The body wants to require that companies show a current cost for options grants on their income statements. The group has agreed that the measurement date for options should be the grant date (they had been considering making it the date options vested), just as under current FASB rules for footnote disclosure of options in the US. In a European-style option (one where the holder cannot exercise until the expiration date), once the present fair value is established, no adjustments would be made for the holder's inability to exercise the option. If the company uses U.S.-style options (where exercise can occur any time after vesting), then the model should account for the inability to exercise only during the vesting period. The board agreed that the value of the options should be recorded as they are earned, but that no adjustments should be made if the options are subsequently forfeited, such as when some or all of the options fail to vest. This approach differs from the model developed in the U.S. by the FASB.

The IASB continues to discuss the issue of options accounting and will issue a final recommendation at a future date.