The Web-based tool allows companies to calculate the most accurate option value to meet the mandate of the recently released Financial Accounting Standards Board (FASB) requirement that companies expense employee stock options starting in 2005 (See FASB Hands Down Option Expensing Proposal ).
It also allows companies to see how their own valuation assumptions compare to peer companies, CT Corporation said in a news release. CT is licensing the new application through a partnership with Equity Methods, LLC, developers of option mathematics and valuation software.
About 75% of publicly-held companies have options plans, requiring them to comply with the new FASB rules.
To determine the optimal option value, the CT Option Evaluator uses Equity Method’s proprietary Binomial Preference Model, among several available valuation options. The valuation approach accounts for important options cost factors that distinguish employee stock options from traded options – such as non-transferability, hedging constraints and vesting requirements that are not factored into other valuation models – to be included in determining the option value.
In addition to the Binomial Utility Model, the CT Option Evaluator allows companies to compare valuations using a variety of methods, including the modified Black-Scholes-Merton and traditional binomial models, and displays the results in reports, according to the news release.
More information is at www.ctoptionevaluator.com .