FASB Finalizes Accounting Rules for Equity-Based Compensation

After extended debate regarding whether and to what extent there should be a charge to earnings for stock option grants and other equity-based compensation, and despite strong opposition, in particular, from technology companies, the Financial Accounting Standards Board (FASB) adopted final revisions to Financial Accounting Statement (FAS) No. 123, now referred to as “Share- Based Payment.” Previously FAS 123 allowed a company to choose to account for equity compensation (including options) on a “fair value” method which requires a charge for all equity compensation including options or to continue to use the “intrinsic value” method under Accounting Principles Bulletin No. 25 which did not require a charge to earnings for most options (although it did require a charge to earnings for stock grants).