NEWS RELEASE 11/18/02
FASB Issues Invitation to Comment That Compares IASB's and
FASB's Accounting for Stock-Based Compensation
Norwalk, CT, November 18, 2002—The Financial Accounting
Standards Board (FASB) has issued an Invitation to Comment,
Accounting for Stock-Based Compensation: A Comparison of FASB
Statement No. 123, Accounting for Stock-Based Compensation,
and Its Related Interpretations, and IASB Proposed IFRS,
Share-based Payment. That Invitation to Comment explains the
similarities of and differences between the proposed guidance on
accounting for stock-based compensation included in the
International Accounting Standards Board’s (IASB’s) recently issued
exposure draft and the accounting for stock-based compensation under
FASB Statement 123.
Through the Invitation to Comment, the FASB seeks constituents’
views on those similarities and differences as well as other aspects
of the fair value based method of accounting for stock-based
compensation, including issues related to measuring the fair value
of employee stock options. A copy of the document
is available on the FASB's website. The comment period ends on
February 1, 2003.
In reflecting on the fair value based method of accounting in
Statement 123 and the IASB proposal, Robert Herz, FASB Chairman,
commented, “While some differences exist between the IASB’s and
FASB’s methodologies, the two are similar in many respects. For
example, both the IASB and the FASB have concluded that stock-based
compensation should be recognized as an expense. Both base the
amount of compensation expense on the fair value of stock-based
awards at grant date.” Herz added, “The comments we receive from
constituents on the similarities and differences between the two
approaches will provide valuable input to the FASB when it considers
how we can improve the accounting for stock-based compensation in
the U.S., including whether we should require use of the preferred
fair value based method.”
In the mid-1990s, the FASB proposed that companies be required to
recognize stock-based compensation in the income statement using a
fair value based method.
Due to the strong opposition the FASB received on its proposal,
the Board modified its position. That modified position, reflected
in Statement 123, permits the continued use of the intrinsic value
based method of accounting provided that companies disclose the
amount of net income and earnings per share that would have been
reported had the preferable fair value based method been used.
FASB Practice Fellow Michael Tovey added, “Another important
reason for issuing this Invitation to Comment was to provide
information that our constituents would find useful in analyzing and
commenting on the IASB exposure draft. The FASB will not be
commenting directly to the IASB on its proposal, and, therefore, we
encourage all of our constituents to directly participate in the
IASB’s due process by voicing their views to the IASB in
London.”
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the
designated organization in the private sector for establishing
standards of financial accounting and reporting. Those standards
govern the preparation of financial reports and are officially
recognized as authoritative by the Securities and Exchange
Commission and the American Institute of Certified Public
Accountants. Such standards are essential to the efficient
functioning of the economy because investors, creditors, auditors
and others rely on credible, transparent and comparable financial
information. For more information about the FASB, visit our website
at www.fasb.org.
The Financial Accounting Standards Board
Serving the investing public through transparent information
resulting from high-quality financial reporting standards developed
in an independent, private-sector, open due process.
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