Understanding Accounting Features for Stock-Based Compensation
This section provides overviews of the system-supported standards for reporting equity-based compensation and the setup steps for complying with FAS 123.
Under FAS 123, companies that offer equity-based compensation plans must report the fair value of plan-related compensation in their financial disclosure statements. Stock Administration provides the tools and reports that you need to comply with these requirements.
The system supports two standards for reporting the value of equity-based compensation:
FAS 123, which specifies that companies must report the fair value of stock options and stock purchases as of their grant dates.
APB 25, under which companies can report the intrinsic value of equity-based compensation.
Companies that comply with APB 25 must still make pro forma disclosures of net income and, if publicly traded, earnings-per-share, as though they had adopted FAS 123.
PeopleSoft Stock Administration uses the widely-accepted Black-Scholes option pricing model to calculate the fair value of stock options and stock purchases granted within the system. Black-Scholes uses six inputs in its valuation calculation. Four of these inputs are stored in the system or can be estimated by running reports that gather and calculate historical data.
To prepare Stock Administration to perform stock option and stock purchase valuations:
Select the accounting standard (FAS 123 or APB 25) by which your company discloses the equity compensation on its financial statements.
Select a valuation plan type (stock purchase plans only).
Create option groups (stock options only).