SEC OKs use of a surrogate to value employee share options
25 Oct 2007
In a letter to Zions Bancorporation, SEC Chief Accountant Conrad Hewitt indicated that ESOARS ('employee stock option appreciation rights securities') are sufficiently designed to meet the measurement objective of FASB Statement No. 123(R) Share-Based Payment.
ESOARS are derivative securities that are sold to investors. ESOARS are designed to (1) track the value of a referenced pool of employee share options (that is, there is no one-to-one correlation between the issuance of an employee share option and ESOARS), (2) pay investors as employee share options are exercised, (3) make payments to their investors on the basis of a pro rata share of the intrinsic value realized by employees upon exercise of their share options in the referenced pool, and (4) be priced, upon issuance, through a modified Dutch auction. |