Disclosure the company also opposed exposure draft

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Unformatted text preview: ption valuation mostly because of practical reasons. Regarding the minimum value method BankAmerica states: “the initial calculation itself is simple, and the variables that enter into calculation are objective.” Furthermore, significant number of adjustments would not be necessary. It is more precise and accurate than the fair value method. The fair value calculation is much more judgmental and complex than the minimum value calculation. Therefore the company expressed its opinion that ”it would be more representationally faithful to measure employee stock options at minimum value (and to disclose this as the measurement basis) than to measure them at fair value.” Measurement Date The c ompany s upported E xposure D raft “ Accounting f or S tock-Based Compensation” proposal to use the stock price at the grant date to measure compensation cost. Attribution Period The company supported FASB’s opinion that “no compelling reason exists to extend the attribution period beyond the vesting date, because as the Board indicates, the right to retain and exercise the option has been earned by the date the option vests.” Disclosure The company also opposed Exposure Draft “Accounting for Stock-Based Compensation” proposal to have a three-year disclosure period followed by income statement recognition in the fourth year. BankAmerica Corporation agreed just with requirement of additional disclosures only. The company also stated that FASB should require “either disclosure or recognition from the effective date forward, but not one and then another.” Effective Date and Transition 55 BankAmerica suggested delaying the effective date by at least one year from the date when Exposure Draft “Accounting for Stock-Based Compensation” is finalised in order to give financial statement preparers time to understand and implement it. 4.2 Review of Comment Letters Submitted to the ED for SFAS 148 As it was not possible to examine all submitted Comment Letters, we have chosen seven companies and two organizations, which presented their comments on the proposed Amendment which eventually resulted in SFAS 148.. Where possible, we have selected respondents who also provided Comment Letters to the Exposure Draft for SFAS 123. Dates of letters are given in parentheses. The selected companies are: • • • • • • • • • The Coca-Cola Company (2002) The Software & Information Industry Association (2002) Anheuser-Busch (2002) Accounting and Valuation Group of UBS Warburg Equity Research (2002) JPMorgan Chase & Co. (2002) SunTrust Banks, Inc. (2002) Merrill Lynch & Co. (2002) Microsoft Corporation (2002) Credit Suisse Group (2002) Further, we review the most controversial issues or issues that raised the most concern for respondents. Again, we provide brief description of each respondent, unless they were discussed previously. 4.2.1 The Coca-Cola Company The Coca-Cola Company (Coca-Cola) adopted the fair value method of accounting for stock-based compensation plans, proposed in SFAS 123 as of January 1, 2002. Taking into consideration this decision made by the company, Coca-Cola was extremely interested in the requirements of the proposed statement. In its Comment Letter, Coca-Cola agrees with FASB suggestion to apply the fair value method, stressing the importance of the two additional transition methods stated in SFAS 148, which would help companies to avoid the ramp56 up effect. Nevertheless, the company airs its disagreement about the location of certain required disclosures in financial statements. SFAS 148 requires companies to disclose an extensive amount of information, which should be presented in the "Summary of Significant Accounting Policies." Coca-Cola believes it would be more appropriate to include such specific disclosures in a separate footnote related solely to stock-based compensation. 4.2.2 The Software & Information Industry Association The Software & Information Industry Association (SIIA) is the principal trade association for the software and digital content industry. SIIA provides global services in business development, corporate knowledge and intellectual property protection to more than 500 leading software and information companies. SIIA's members are both the largest and oldest technology enterprises of the world as well as small and new companies (www.siia.net). In general, SIIA supports FASB's attempt to amend SFAS 123 and provide companies who wish to adopt the fair value method of accounting for stockbased compensation plans with two more transition methods and approves the requirements for better and more frequent disclosure to be provided to investors. The primary concern expressed in SIIA's Comment Letter is related to valuation models used for measuring employee stock options. SIIA highlights that "…more flexibility and additional transparency alone will not necessarily provide investors with better or more meaningful information." SIIA places an emphasis on the imperfections of the Black-Scholes model used to measure stock op...
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This document was uploaded on 10/31/2013.

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