The Securities and Exchange Commission's top accountant has added his thoughts on how to properly account for stock options in the historical financial statements of public companies.In a letter sent from his office, SEC Chief Accountant Conrad Hewitt discusses the consequences offered under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. The letter, sent to committee chairmen at Financial Executives International and the American Institute of CPAs, discusses dating an option award to predate the actual award date, option grants with administrative delays, the uncertainty as to the validity of prior grants, and other related circumstances.

Hewitt said that the views expressed in this letter will assist in the resolution of accounting issues that have been raised during reviews of past stock option grants. Before the adoption of the Financial Accounting Standards Board's Statement No. 123, Share-Based Payment, which was revised in 2004, many public companies accounted for stock options under Opinion No. 25.

As Hewitt notes in the letter - addressed to FEI Committee on Corporate Reporting chair Lawrence Salva and AICPA Center for Public Company Audit Firms chair Sam Ranzilla - several companies have recently issued press releases announcing restatements due to errors in their accounting for grants of options to employees, members of the board of directors and other service providers. Many other companies have announced that they are looking into their past option-granting practices.

The letter, classified as staff guidance, did not have to be approved by the SEC. It can be viewed at

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