March 30, 2005

SEC Issues Option Expensing Guidance

Yesterday, the SEC’s Office of Chief Accountant issued SAB 107 regarding the FASB’s option expensing standard. SAB 107 adds a new Topic 14 to the SAB series regarding Statement 123(R) and amends portions of some existing topics – as well as addresses a range of disclosure issues, from MD&A to non-GAAP measures.

As noted in the SEC’s press release, “Among other things, SAB 107 provides interpretive guidance related to the interaction between Statement 123R and certain SEC rules and regulations, as well as provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SAB 107 also reminds public companies of the importance of including disclosures within filings made with the SEC relating to the accounting for share-based payment transactions, particularly during the transition to Statement 123R.”

In addition, the SEC’s Office of Economic Analysis posted this interesting memo regarding valuation and the economic impact of option expensing.

Don’t forget next week’s timely NASPP webcast – “What You Need To Know About Option Valuation” – which is the 3rd webcast from the NASPP on this important topic during the past few months (archives of the other webcasts are still available, including practical remarks from FASB staffers).

GAO Criticizes Security Measures at the SEC

According to a 29-page report released last week by the Government Accountability Office, computer security at the SEC is lax enough to put financial – and personnel – information at risk. The problems cited in the report run the gamut, from not implementing effective electronic access controls to weaknesses in other information system controls (including physical security, segregation of computer functions, and application change controls).

According to a Washington Post article on Friday, the SEC responded by pledging to address the issues by June 2006. A spokesman said the SEC already has installed “intrusion detection systems” and replaced firewalls.

Personally, I am always amazed that there have not been any reported hacks of the EDGAR system – as that has to be one of the most popular targets of the hacking community, even for the youngsters for whom it’s just a sport. It is easy to imagine the harm that could be caused by someone that hacked EDGAR (e.g. post a fake 8-K with some drastic news that is a market-mover).

April E-Minders is Up!

We have posted our April issue of E-Minders – as well as this interview with Denise Annunciata on State Law Research.