The Securities and Exchange Commission will soon give companies more guidance on how to value stock options, according to published reports.
A ruling is expected from Securities and Exchange Commission chief accountant Donald Nicolaisen, who will step down in October, on a valuation method proposed by Cisco Systems Inc. In May, Cisco asked the SEC for approval to sell a new class of securities whose trading would provide an estimated value for the Cisco stock options issued to all company employees.
The option expensing rule, adopted by accounting standard-setters and supported by the SEC, would soon require companies to have to treat stock options as a routine business expense. The controversial rule led many in the country's high-tech industry to cry foul, many of whom built their companies on such options. In March, the SEC said companies would be able to choose from a variety of option valuation methods, including the Black-Scholes-Merton model. About six weeks later, saying that valuation methods proposed by regulators put too high a value on stock options, Cisco offered its market-based alternative and the SEC said it would evaluate the proposal.
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