Financial Reporting Newsletter

March 2006

Issues Covered

Introduction

Background and Timeline

What is the scope of Statement 123(R)?

Is the plan compensatory for financial accounting purposes?

Does the plan create equity interests or liabilities?

If the plan is compensatory, when is compensation measured?

If the plan is compensatory, how is compensation measured?

How is the expected volatility of the stock price estimated?

How is the expected term of the options estimated?

How are restrictions on shares or options considered?

If the plan is compensatory, over what period is compensation recorded?

What is the impact of service, performance and market conditions?

What about nonvested and restricted shares?

How are modifications of grants treated?

How are changes in estimates treated?

How are income tax benefits accounted for?

How are cash flow statements affected?

How are EPS computations affected?

What are other implementation issues to consider?

What are issues that private and small public companies should focus on?

What disclosures should be presented?

Effective date and transition considerations

What should companies do in response to Statement 123(R)?

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If you would like further information or to discuss the implications of the matters discussed in this Financial Reporting letter, please contact the BDO USA engagement partner serving you or one of the following partners: Ben Neuhausen, Andy Gibson, or Jim Blinka.

Ben Neuhausen
bneuhausen@bdo.com
(312) 616-4661

Andy Gibson
agibson@bdo.com@bdo.com
(404) 979-7106

Jim Blinka
jblinka@bdo.com
(414) 272-5900

Material discussed in this Financial Reporting letter is meant to provide general information and should not be acted upon without first obtaining professional advice appropriately tailored to your individual circumstances.

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Copyright © 2006, BDO USA,LLP. Material discussed in this Financial Reporting newsletter is meant to provide general information and should not be acted upon without first obtaining professional advice appropriately tailored to your individual facts and circumstances.