The Financial Accounting Standards Board (FASB) gave companies another six months to meet the new
requirements on expensing employee stock options, which will now take effect on June 15, 2005, instead
of Jan. 1.
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The FASB has retracted the preference it expressed earlier for lattice-type valuation methods, and companies can use either a binomial or lattice method. Stephen Zwicker, a consulting actuary at Watson Wyatt, says the board wants to give companies room to come up with better methods. "There are going to be people out there looking for ways to value options and they don't want to stifle
innovation," he says.
The Board voted down a valuation method proposed by three tech companies–Cisco Systems Inc., Qualcomm Inc. and Genentech Inc.–that would have substituted the volatility of the S&P 500 for an individual company's volatility when valuing its options. At an earlier meeting, the FASB voted down a valuation method put forward by Integrated Finance Inc. that utilized the prices on publicly traded options in valuing employee stock options.
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