NU Online News Service, Aug. 12, 1:16 p.m. – Two large insurers have announced plans to treat the fair value of the stock options they grant as expenses starting in January 2003.
The insurers, American International Group Inc., New York, and MetLife Inc., New York, are making the change to comply with Statement of Financial Accounting Standards No. 123.
SFAS 123, which deals with accounting for stock-based compensation, is a voluntary accounting standard developed by the U.S. Financial Accounting Standards Board., Norwalk, Conn.
AIG notes in a statement about its decision to comply with SFAS 123 that complying with the standard would have reduced the company’s reported second-quarter net income by only 5 cents per share.
“The costs of our stock option plans are relatively modest,” AIG Chairman M.R. “Hank” Greenberg says in the statement. “Historically, dilution as a result of stock option grants at AIG has been minimal, and we expect it will continue to be minimal in future years.
AIG and other companies already account for the effects of stock options by showing the effects on “dilution,” or the strength of existing shares of stock.