But just as they've started to make some headway, questions regarding the backdating of stock options
threaten to immerse them and their companies anew in a wash of investigations by the Securities and Exchange Commission (SEC), federal prosecutors, the Internal Revenue Service (IRS) and shareholder-related class-action derivative suits.
The guidance from FASB is clear: Companies must determine and report the fair value of stock options
they use to compensate employees.
123(R), Share-Based Payment, has a single goal: to report the fair value of employee compensation paid in the form of stock options
and other share-based payments in financial statements.
A recent ruling provides guidelines on FICA, FUTA and income tax withholding from nonstatutory stock options
and deferred-compensation plans transferred between spouses incident to divorce.
Angus noted that proposed regulations have been released that would require companies to include stock-based compensation and stock options
in the pool of shared costs charged to the participants in a cost-sharing arrangement.
Once the gift value is determined - using a quantitative valuation model to value publicly traded stock options
- discounts can be taken from this fair market value number, relying on the principles of illiquidity and lack of marketability, to further reduce the gift tax value.
That inquiry included assertions relating to the exercise of stock options
during and prior to 2002, by a former chief executive officer of the company who left the company in 2005.
The new conventional wisdom is that stock options
are on the way out, with restricted stock and other forms of long-term incentives replacing options as the predominant form of executive compensation.
So Scotts took a hit for the third of its outstanding stock options
that come due each year, charging about $5 million--roughly 3% of its $160 million pretax earnings--against its 2003 P&L.
What are the income and employment tax consequences of transferring stock options
and deferred compensation in a divorce?
If you practice family law, stock options
are not the hot topic they were two years ago.
Department of the Treasury and the Internal Revenue Service on an IRS notice requiring the separate information reporting of the compensatory element of nonstatutory stock options