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SEC Extends Compliance Dates for FAS 123R Share Based Payment Disclosure

April 2005

The Securities and Exchange Commission announced on April 14, 2005 a six month postponement for most companies of FAS 123R which requires expensing of stock options (see Press Release 2005-57). Prior to this extension, public companies were required to comply with FAS 123R in their fiscal quarters beginning after June 15, 2005 and thus generally for most issuers beginning with the quarter ending September 30, 2005.

The April 15 SEC release ( Release 33-8568, in PDF format) now requires companies to apply FAS 123R beginning with the first fiscal year (as opposed to the first fiscal quarter) after June 15, 2005 (or December 15, 2005 in the case of small business issuers). As a result, FAS 123R will now first be generally effective, at least in the case of calendar year companies, for the quarter ending March 31, 2006 giving such companies a six month compliance extension. Those companies with fiscal years beginning between July and December of 2005 will be required to comply with the standard beginning with the first fiscal quarter after their 2005 fiscal year-end. Therefore, except for small business issuers, the SEC action gives no FAS 123R extension for companies whose fiscal years end on June 30 and less than a full six month extension of the compliance period for companies whose fiscal years end after June 30, 2005 but before December 31, 2005.

According to the SEC, this action to extend the FAS 123R deadline was taken in response to feedback from public companies primarily concerning problems of adopting new accounting principles in the middle of a fiscal year which are magnified by the severely stretched accounting staffs of public companies.