Employee Stock Option Valuation

Regional Bank Response to SFAS 123. - Bank Accounting and Finance

Analytic FocusEmployee Stock Option Valuation

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The article discusses the impact of the revised Statement of Financial Accounting Standards No.123 (SFAS No.123) issued by the U.S. Financial Accounting Standards Board on employee stock option (ESO). The revised SFAS No.123 (SFAS No.123R) eliminates the use of the intrinsic-value method for option grants. The SFAS No. 123R requires public entities to record the value of ESO with the use of fair value. Large regional banks have preferred to use the Black-Scholes-Merton model for estimating the fair value of option grants.

– Cowan, A. (2005).

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