SEC Delays Adoption of FAS 123(R)
FOR IMMEDIATE RELEASE
Upper Saddle River, N.J. – April 15, 2005. The SEC issued a press release on Thursday announcing that public companies will now be required to adopt FAS 123(R) by their first fiscal year beginning after June 15, 2005.
The original issue of FAS 123(R) indicated that expensing would have been required in the first fiscal quarter beginning after this date. For the typical calendar-year company, the change from implementation in the first fiscal quarter to the beginning of the fiscal year results in a six-month delay.
- Generally, companies with fiscal years beginning in the third calendar quarter will not be impacted by the change.
- For small business issuers, the standard will be effective in the first fiscal year after December 15, 2005 (rather than the first fiscal quarter, as originally required under FAS 123(R)).
Here is a copy of yesterday’s release from the SEC:
COMMISSION AMENDS COMPLIANCE DATES FOR FASB STATEMENT NO. 123R ON EMPLOYEE STOCK OPTIONS
2005-57
Washington, D.C., April 14, 2005 - The Securities and Exchange Commission announced today the adoption of a new rule that amends the compliance dates for Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (Statement No. 123R).
Under Statement No. 123R, registrants would have been required to implement the standard as of the beginning of the first interim or annual period that begins after June 15, 2005, or after Dec. 15, 2005 for small business issuers. Calendar year-end companies that are not small business issuers, therefore, would have been permitted to follow the pre-existing accounting literature for the first and second quarters of 2005, but required to follow Statement No. 123R for their third quarter reports.
The Commission's new rule allows companies to implement Statement No. 123R at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005, or Dec. 15, 2005 for small business issuers. This means, for example, that the financial statements for a calendar year-end company do not need to comply with Statement No. 123R until the interim financial statements for the first quarter of 2006 are filed with the Commission. The financial statements for a company, other than a small business issuer, with a June 30 year-end, however, must comply with Statement No. 123R when the interim financial statements for the quarter beginning July 1, 2005 are filed with the Commission.
The Commission's new rule does not change the accounting required by Statement No. 123R; it changes only the dates for compliance with the standard.
Donald T. Nicolaisen, the Commission's Chief Accountant, said, "The accounting required by Statement No. 123R represents a significant improvement to U.S. generally accepted accounting principles, and the implementation of that standard will improve transparency for investors. Feedback from public companies, accounting firms and others, however, indicated that implementing Statement No. 123R in a period other than the first quarter of a fiscal year potentially could make compliance more complicated for companies and comparisons of quarterly reports more difficult. Concerns also were raised that the accounting staffs at companies and accounting firms already have been stretched thin by other compliance responsibilities, such as internal controls reporting. In addition, implementing the new standard at the beginning of a fiscal year allows companies to change their accounting systems in a more orderly fashion, and should allow auditors to conduct more consistent audit and review procedures. Companies that choose to implement Statement No. 123R earlier than required are encouraged to do so."
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Compensation Resources, Inc. (CRI) provides compensation and human resource consulting to a broad range of companies including start-up, emerging, and middle market companies. CRI specializes in Executive Compensation, Board Advisory Services, Salary Administration, Performance Management, and Sales Compensation.
For more information on our consulting services, please contact us at (877) 934-0505 x103 or visit our website at
www.compensationresources.com . If you would like to speak with someone about how FAS 123(R) may impact your Company, please contact Dan Moynihan at
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