FASB Standards No. 123
(revised 2004) Share-Based Payment

Greetings,

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment. Statement 123(R) requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost is to be measured based on the fair value of the equity or liability instruments issued.

Statement 123(R) replaces Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Under Statement No. 123(R), entities will no longer be permitted to apply the guidance of Opinion 25.

Public entities (other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. Public entities that file as small business issuers will be required to apply Statement 123(R) in the first interim or annual reporting period that begins after December 15, 2005. The FASB decided to provide nonpublic entities additional time to prepare for the implementation of Statement 123(R). Those entities will not be required to apply Statement 123(R) until the beginning of the first annual reporting period after December 15, 2005.

Statement 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.

A complete copy of Statement No. 123(R) can be downloaded from the FASB website at: www.fasb.org/pdf/fas/123/pdf

The FASB has also published a Frequently Asked Questions document addressing Statement No. 123(R). This document can also be downloaded from the FASB website at: http://www.fasb.org/project/123r_faq.pdf.

This e-mail is only a brief summary of the requirements of the final pronouncement, and is provided by the GHP Financial Group as a service to clients and other interested individuals. Any action based on this information should be taken only after consulting with your GHP Financial Group advisor or legal counsel. For more information, please contact us at (303) 831-5000.

Regards,

Mike

Michael F. Filkoski, CPA
Director
GHP Horwath, P.C.