A Towers news release said its new service will provide valuations of stock option and other equity-based employee awards. Towers will use a proprietary version of the lattice model recommended under the latest option expensing guidance proposed by the Financial Accounting Standards Board (FASB), the company said in the announcement.
Lattice models, which factor in multiple variables, result in more precise valuations than those of other commonly used models, Towers said. For example, a lattice model would typically take into account employee option exercise behavior, which has been shown to have a significant impact on stock option values (SeeFASB Hands Down Option Expensing Proposal ).
The FASB’s guidance will require companies to report the fair value of stock option grants and other equity-based employee awards on their income statements, beginning as early as the first quarter of 2005.