private investment trust Commissioner Paul Atkins gave a speech on Wednesday, June 8 before the Semiconductor Industry Association Leadership Luncheon in San Francisco. In it, he gave a couple of sobering insights into the current thought processes at the SEC – even if the views that he expressed were his own. And it sounds like Dr. Atkins recommends a corporate diet of low-carb stock options picked from a scrawny, patched-together market, instead of ones with estimated values raised in a calculator.
He offered praise for the FASB’s independence, but there’s heavy irony in his note that, since Sarbanes-Oxley, the relationship between the SEC and the FASB has changed, in particular that “the SEC now has more responsibility over the FASB, especially how the FASB funds itself. I have focused on increasing the transparency of FASB’s budget and processes and its overall accountability.”
Maybe that’s not a change for the better when it comes to setting standards for stock option accounting, it would seem.
Atkins went on to point out that “I have not met many people, either inside or outside the Commission, who are truly confident the FASB Standard 123-R models, Lattice or Black-Scholes, provide good estimates of employee stock option value, especially for options distributed in a broad-based plan. That has been and continues to be a concern for me, particularly if these estimations are material and can be subject to management of the assumptions and outcome.”
Well, given that he was speaking at an SIA function, it’s not hard to meet many people “outside the Commission” who are truly confident that the FASB standard-endorsed models will provide good estimates of option value. But he hasn’t met many “inside the Commission” who believe it’s workable?
Maybe he hasn’t read the analysis done by the SEC’s own Office of …