The Options Expensing Alert helps investors identify aggressive and conservative valuation practices and calculate the impact of companies’ expensing assumptions on the quality of their disclosed earnings, according to a press release from ISS.
The alert also provides institutional investors with:
- grant information and assumptions for companies’ stock option expense disclosures required by the Financial Accounting Standard Board’s FAS 123R (See SEC Links Executive Comp Disclosure with FAS123R ).
- a recalibrated option expense based on a uniform methodology, which accounts for employee behavior in exercising their options, and ensures accurate and consistent values for employee stock option grants.
“FAS 123R has improved disclosure around stock option expensing; however, investors must still closely review the options pricing model assumptions for companies with a significant option expense,” said Patrick McGurn, ISS’ Executive Vice President and Special Counsel, in the press release. “Companies on average are disclosing option expenses that are 29% lower than calculated by our methodology.”