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123R Accounting Issues

123R Accounting Issues. Transition Prospective method for “Non-public” companies – confusion Only private companies that used “minimum value” method Modified prospective method for “public” companies Any company that didn’t use “minimum value” method

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123R Accounting Issues

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  1. 123R Accounting Issues Transition • Prospective method for “Non-public” companies – confusion • Only private companies that used “minimum value” method • Modified prospective method for “public” companies • Any company that didn’t use “minimum value” method • Very few modified retrospective elections for “public” companies • Requires restatement • Changes of auditor during look-back period require consents • Poolings during look-back period must be factored in The Fox School Fourth Annual Conference on Executive Compensation

  2. 123R Accounting Issues APIC Pool • Election to use Alternative Simplified Method to establish opening balance • Limits data required to prior annual reports • Provides APIC pool for pre-1995 awards • Uses current expected tax rate not historical • Permits mingling of ISO with NQSO if data to parse not available The Fox School Fourth Annual Conference on Executive Compensation

  3. 123R Accounting Issues Graded Vesting Awards • Accounting election to straight-line expense or treat each vesting as a separate award The Fox School Fourth Annual Conference on Executive Compensation

  4. 123R Accounting Issues Acceleration of vesting in 2005 to avoid expense The Fox School Fourth Annual Conference on Executive Compensation

  5. 123R Accounting Issues New disclosures and alterations to previous disclosures • Need to employ disclosure checklist • Pro-forma disclosures for minimum value not permitted The Fox School Fourth Annual Conference on Executive Compensation

  6. 123R Accounting Issues Modifications • Treated as exchange of old option for new • Value new instrument • “Re-value” old instrument • Expense excess value of new over old The Fox School Fourth Annual Conference on Executive Compensation

  7. 123R Accounting Issues Modifications that create “discounted” options • Create deferred compensation The Fox School Fourth Annual Conference on Executive Compensation

  8. Contact Information Glenn James glenn.james@gt.com,215.656.3055 The Fox School Fourth Annual Conference on Executive Compensation

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