Employee Stock Options Valuation 2004 FAS 123
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Use the same software the Financial Accounting Standards Board (FASB) used to generate the examples in A87 in the 2004 Financial Accounting Standards 123 (Revised), calling for the application of binomial lattices. This ESO Valuation Toolkit software was developed by Dr. Johnathan Mun, who advised and taught the Board of Directors, research fellows and staff members at FASB in 2003 and 2004, on Black-Scholes and binomial lattice modeling with respect to valuing employee stock options. Dr. Mun is also the author of numerous books including "Valuing Employee Stock Options (Under 2004 FAS 123 Requirements)" published by Wiley Finance, 2004.

In what the Wall Street Journal calls "among the most far-reaching steps that FASB has made in its 30 year history," in December 2004, FASB released a Final Statement of Financial Accounting Standards (FAS) on Share-Based Payment amending the old FAS Statements 123 and 95 issued in October 1995.

Basically, the proposal states that all new and portions of existing employee stock option (ESO) awards that have not yet vested will have to be expensed, effective June 15, 2005. In anticipation of the Standard, many companies such as GE and Coca-Cola have already voluntarily expensed their ESOs at the time of writing, while hundreds of other firms are now scrambling to look into valuing their ESOs.

Our consulting and customized software services apply the best methodology that still conforms to the FAS 123 requirements, and by doing so, firms can potentially reduce their expenses by millions of dollars a year by avoiding the unnecessary over-valuation of the naïve Black-Scholes Model.

To learn more about our customized binomial super lattice approach, download Dr. Johnathan Mun's article on the valuation impacts of FAS 123. This article is based on his latest book, "Valuing Employee Stock Options Under the 2004 FAS 123 Requirements," (Wiley, 2004). The models and algorithms used in this article and book are based on the software.

Real Options Valuation Services

In Real Options Valuation consulting, we can assist you in a variety of roles including:

  • Help you get started with Framing the Real Options
  • Review existing models and develop new ones as required
  • Assist in data collection and assumptions gathering
  • Implement Real Options Analysis in your projects
  • Provide leave-behind models and documentation
  • Training your analysts to perform the analysis
  • Create user-defined customized Real Options models and software

Instead of simply getting a software that you do not know how to use, or a consulting report that is worthless in 3 months, we will guide and train you and your team in the application and valuation of real options. We will complete one or more business cases together, and at the end of the engagement, you will receive a series of financial Excel models built to accommodate your exact needs, complete with real options models, functions, and analytical code built to your specifications.

Depending on the need, the Real Options Analysis consulting will be performed either by a team of experts or by an individual. Regardless of the situation, the lead executive consultant will be Dr. Johnathan Mun, a world renowned expert on Real Options and Risk Analysis, and the author of 12 books on real options, risk analysis, employee stock options, and related topics.

Download our white paper on "Real Options Analysis in Layman's Terms."

To learn more about real options, download Chapter 1 of Dr. Johnathan Mun's, "Real Options Analysis, 2nd Edition" (Wiley, 2005) for free.

Model Building Services

We provide Excel model building consulting services including the creation of macros, functions, and other customized VBA modeling. These models will be built to the client's specification and used royalty-free throughout the corporation, providing a modeling standard for your firm. In addition, we can incorporate Risk Simulator, Real Options SLS or ESO Valuation Toolkit functionalities within your existing models, spreadsheets, or proprietary software