Hartford To Expense Stock Options In 2003
NU Online News Service, Sept. 24, 1:25 p.m. EST?The Hartford Financial Services Group, Inc. said its board has adopted a change in accounting for employee stock options that will go into effect in January 2003.
At its Sept. 19 meeting, the board of the Hartford, Conn.-based company approved the fair-value recognition provisions of accounting for options. This method will be used, the company said, for all awards granted or modified after Jan. 1, 2003, under the guidance of the Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
According to The Hartford, under current accounting rules, if the company had expensed options issued in 2002, the impact on earnings would have been approximately 8 cents to 9 cents per diluted share.
The firm estimated that if future options grants remain at the same level, the annual impact would increase to approximately 25 cents to 27 cents per diluted share, considering the company's customary three-year vesting period.
SFAS 123 permits companies either to use the fair-value method and recognize compensation expense upon the issuance of stock options, thereby lowering earnings, or, alternatively, to disclose the pro-forma impact of the issuance.
The Hartford said it believes it is appropriate to move to the fair-value method to record employee stock-based compensation expense.
The company noted that the Financial Accounting Standards Board is conducting a fast-track project, which will likely provide other alternatives in addition to the current rules for expensing the cost of stock options.
The Hartford said that while it is committed to expensing the fair value of its option grants, the ultimate transition method to be used by the company will be determined after the FASB project is completed later this year.
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