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CFAI consistency on option expensing practices

Though a minor quip, I think it’s notable that new to this year’s LII curriculum is

Reading 25: FAS 123(R) - Accounting for Stock-Based Compensation: Happy Anniversary?

which supports the following LOS:

a. explain the key features of stock option accounting in the United States;
b. describe the differences between the U.S. and international standards of accounting for stock options

Both LOS are current and relevant, observing the transition to FAS 123(R), great. So but then in what I can only reason is a sloppy oversight, they include the following passage in

Reading 40: Equity: Concepts and Techniques (Volume IV, p.119-120):

“In the United States, footnote disclosures are required, but recording of an expense is optional for most stock options.” … “This matter is getting wide attention, and some U.S. firms have recently decided to voluntarily begin recording an expense for such stock options allocation.”

Anyway, Reading 40 is copyrighted in 2004, which if I remember correctly is the year that FAS 123 was revised.

It just seems odd to me to require us to know current practices under FAS 123(R) and yet in a later reading present material that appears to be related to APB 25 w/o even footnoting how things have changed and/or stand in contrast to Reading 25.

Have I missed something, or is this a legitimate grievance?

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On SS6, right before they start listing the LOS’s, they have a few paragraphs. The second paragraph down should tell you that for which you seek.

TMurf, thank you for taking a look into this. I think the paragraph you’re referring to is on p.113 of Volume II.

“The FASB had the topic of accounting for employee stock options under review for several years and recently voted to require the inclusion of stock option expenses related to the issuance of stock options in the income statement. Employee stock options were previously excluded from the income statement but disclosed in the footnotes. International accounting standards also require employee stock options to be expensed.”

My understanding was consistent with this passage. All I was saying is CFAI should have updated the sections of Reading 40 I cited above that relate to LOS b. for that reading:

LOS b. contrast the major differences among national accounting standards and international accounting standards (IAS)

Reading 40 in isolation leads one to believe that the issue of option expensing is still a major difference between US GAAP and IAS GAAP, whereas Reading 25 discusses the more current practices under FAS 123(R) that appear to be consistent with IAS practices.

Bottom line, I think this minor portion of Reading 40 may mislead candidates in their preparation for this LOS.