AFP To Release Stock Option Valuation Guide

December 16, 2004 ( - The Association for Financial Professionals has announced that it will publish a guide to valuing stock options.

The guide – which will be released soon, according to the company – is authored by Daniel Abrams, a consultant with NERA Economic Consulting. Entitled “AFP Guide to Valuing Stock Options”, the guide aims to provide both general management decision-making information and a detailed analysis of the computation involved in the valuation required by FASB 123, which requires companies to report employees’ stock option plans as an expense on their financial statement (See  FASB Releases Stock Option Expensing Rule ).

The guide is intended to assist financial professionals who are leading their companies in transition to the new standard of mandatory expensing of employee stock options, according to the release. It provides the following guidance:

  • explains and analyzes FAS 123 and the recent amendments that make expensing a requirement.
  • describes the various models that a company should consider for valuing stock options to satisfy the new accounting requirements, including a discussion of the necessary inputs, data sources, and methods of implementation.
  • presents sample exercises for the various valuation models.
  • analyzes alternatives to standard stock options and the implications of changing a company’s equity-based compensation strategy in light of recent developments.

A copy of the guide will be available in February 2005 through the AFP website.

The Association for Financial Professionals ( ) is headquartered in Bethesda, Maryland, and supports more than 14,000 individual members in the treasury and financial management business.