Commission Amends Compliance Dates for FASB Statement No. 123R on Employee Stock Options
The SEC amended compliance deadlines for FASB Statement No. 123R on employee stock-based compensation, delaying mandatory adoption for most companies until the start of their next fiscal year to ease transition burdens, with no fraud, penalties, or wrongdoing involved.
The Securities and Exchange Commission adjusted the compliance dates for FASB Statement No. 123R, allowing companies to implement the new accounting standard for share-based payments at the beginning of their next fiscal year instead of the next reporting period after June 15, 2005. This change primarily benefited calendar-year companies, which could now defer adoption until Q1 2006 rather than Q3 2005, reducing operational strain amid existing regulatory demands like SOX 404. The SEC emphasized that the underlying accounting requirements remained unchanged; the adjustment was purely a timing modification to improve consistency, audit feasibility, and reporting clarity.
The Securities and Exchange Commission announced on April 14, 2005, a regulatory update to amend the compliance dates for FASB Statement No. 123R on employee stock-based compensation. Originally, companies were required to adopt the standard at the start of the first interim or annual period after June 15, 2005, which would have forced calendar-year firms to implement it in Q3 2005. The SEC revised this to permit adoption at the beginning of the next fiscal year, allowing calendar-year companies to delay compliance until Q1 2006 and easing the burden on financial reporting teams already stretched by SOX 404 and other obligations. The change was driven by feedback from public companies and auditors who expressed concerns about operational complexity, inconsistent quarterly comparisons, and audit challenges if the standard were implemented mid-year. Importantly, the SEC stressed that the accounting requirements of Statement No. 123R itself were not altered—only the timing of compliance was adjusted to promote smoother implementation. The Commission encouraged companies that were ready to adopt early to do so, affirming that the standard represented a significant improvement in accounting transparency. No fraud, misconduct, or enforcement actions were associated with this regulatory update; it was solely a procedural adjustment to enhance feasibility and consistency in financial reporting.
Extracted insights
- company calendar year-end company
- agency chief accountant of the securities and exchange commission
- person donald t. nicolaisen
- agency Securities and Exchange Commission
- agency sec web site
- person small business issuers
- Securities and Exchange Commission announced adoption of a new rule amending compliance dates for FASB Statement No. 123R
- Securities and Exchange Commission adopted new rule on Share-Based Payment compliance dates
- Registrants required to implement Statement No. 123R as of beginning of first interim or annual period after June 15, 2005
- Small business issuers required to implement Statement No. 123R after December 15, 2005
- Calendar year-end companies permitted to follow pre-existing accounting literature for first and second quarters of 2005
- Securities and Exchange Commission allows companies to implement Statement No. 123R at beginning of next fiscal year after June 15, 2005
- Calendar year-end company required to comply with Statement No. 123R by first quarter 2006 interim financial statements
- Company with June 30 year-end must comply with Statement No. 123R when interim financial statements for quarter beginning July 1, 2005 filed
- Donald T. Nicolaisen is Chief Accountant of the Securities and Exchange Commission
- Statement No. 123R represents significant improvement to U.S. generally accepted accounting principles
- Implementation of Statement No. 123R will improve transparency for investors
- Public companies, accounting firms indicated implementing Statement No. 123R in period other than first quarter could complicate compliance
- Implementing new standard at beginning of fiscal year allows companies to change accounting systems in orderly fashion
- Release posted to SEC Web site
- Securities and Exchange Commission issued Release 2005-57 on April 14, 2005
COMMISSION AMENDS COMPLIANCE DATES FOR FASB STATEMENT NO. 123R ON EMPLOYEE STOCK OPTIONS FOR IMMEDIATE RELEASE 2005-57 Washington, D.C., April 14, 2005 - The Securities and Exchange Commission announced today the adoption of a new rule that amends the compliance dates for Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (Statement No. 123R). Under Statement No. 123R, registrants would have been required to implement the standard as of the beginning of the first interim or annual period that begins after June 15, 2005, or after Dec. 15, 2005 for small business issuers. Calendar year-end companies that are not small business issuers, therefore, would have been permitted to follow the pre-existing accounting literature for the first and second quarters of 2005, but required to follow Statement No. 123R for their third quarter reports. The Commission's new rule allows companies to implement Statement No. 123R at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005, or Dec. 15, 2005 for small business issuers. This means, for example, that the financial statements for a calendar year-end company do not need to comply with Statement No. 123R until the interim financial statements for the first quarter of 2006 are filed with the Commission. The financial statements for a company, other than a small business issuer, with a June 30 year-end, however, must comply with Statement No. 123R when the interim financial statements for the quarter beginning July 1, 2005 are filed with the Commission. The Commission's new rule does not change the accounting required by Statement No. 123R; it changes only the dates for compliance with the standard. Donald T. Nicolaisen, the Commission's Chief Accountant, said, "The accounting required by Statement No. 123R represents a significant improvement to U.S. generally accepted accounting principles, and the implementation of that standard will improve transparency for investors. Feedback from public companies, accounting firms and others, however, indicated that implementing Statement No. 123R in a period other than the first quarter of a fiscal year potentially could make compliance more complicated for companies and comparisons of quarterly reports more difficult. Concerns also were raised that the accounting staffs at companies and accounting firms already have been stretched thin by other compliance responsibilities, such as internal controls reporting. In addition, implementing the new standard at the beginning of a fiscal year allows companies to change their accounting systems in a more orderly fashion, and should allow auditors to conduct more consistent audit and review procedures. Companies that choose to implement Statement No. 123R earlier than required are encouraged to do so." The full text of the release concerning this item will be posted to the SEC Web site as soon as possible. http://www.sec.gov/news/press/2005-57.htm Home | Previous Page Modified: 04/14/2005
COMMISSION AMENDS COMPLIANCE DATES FOR FASB STATEMENT NO. 123R ON EMPLOYEE STOCK OPTIONS FOR IMMEDIATE RELEASE 2005-57 Washington, D.C., April 14, 2005 - The Securities and Exchange Commission announced today the adoption of a new rule that amends the compliance dates for Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (Statement No. 123R). Under Statement No. 123R, registrants would have been required to implement the standard as of the beginning of the first interim or annual period that begins after June 15, 2005, or after Dec. 15, 2005 for small business issuers. Calendar year-end companies that are not small business issuers, therefore, would have been permitted to follow the pre-existing accounting literature for the first and second quarters of 2005, but required to follow Statement No. 123R for their third quarter reports. The Commission's new rule allows companies to implement Statement No. 123R at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005, or Dec. 15, 2005 for small business issuers. This means, for example, that the financial statements for a calendar year-end company do not need to comply with Statement No. 123R until the interim financial statements for the first quarter of 2006 are filed with the Commission. The financial statements for a company, other than a small business issuer, with a June 30 year-end, however, must comply with Statement No. 123R when the interim financial statements for the quarter beginning July 1, 2005 are filed with the Commission. The Commission's new rule does not change the accounting required by Statement No. 123R; it changes only the dates for compliance with the standard. Donald T. Nicolaisen, the Commission's Chief Accountant, said, "The accounting required by Statement No. 123R represents a significant improvement to U.S. generally accepted accounting principles, and the implementation of that standard will improve transparency for investors. Feedback from public companies, accounting firms and others, however, indicated that implementing Statement No. 123R in a period other than the first quarter of a fiscal year potentially could make compliance more complicated for companies and comparisons of quarterly reports more difficult. Concerns also were raised that the accounting staffs at companies and accounting firms already have been stretched thin by other compliance responsibilities, such as internal controls reporting. In addition, implementing the new standard at the beginning of a fiscal year allows companies to change their accounting systems in a more orderly fashion, and should allow auditors to conduct more consistent audit and review procedures. Companies that choose to implement Statement No. 123R earlier than required are encouraged to do so." The full text of the release concerning this item will be posted to the SEC Web site as soon as possible. http://www.sec.gov/news/press/2005-57.htm Home | Previous Page Modified: 04/14/2005