DELAWARE GEORGIA NORTH CAROLINA SOUTH CAROLINA VIRGINIA WASHINGTON, DC SEC OFFICE OF THE CHIEF ACCOUNTANT ISSUES GUIDANCE ON ACCOUNTING FOR STOCK OPTIONS September 28, 2006 Introduction Partly in response to recent controversies regarding option grant practices, the Office of the Chief Accountant (the “OCA”) of the Securities and Exchange Commission issued a letter earlier this month summarizing its views regarding the accounting for stock options in the historical financial statements of public companies. Prior to the adoption of Financial Accounting Standards Board (“FASB”) Statement No. 123 (revised 2004), “Share-Based Payment” (“Statement No. 123R”), most public companies accounted for stock options under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“Opinion 25”). The OCA letter discusses the accounting consequences under Opinion 25 of a variety of circumstances related to prior award grants. Notably, the letter addresses only the effect of these accounting issues on a company’s financial statements and footnotes and does not address disclosures outside of the financial statements or other actions that may be required with respect to possible violations of laws or regulations. The full text of the letter may be accessed at http://sec.gov/info/accountants/staffletters/fei_aicpa091906.htm Discussion of OCA's Accounting Guidance The OCA's letter is particularly helpful since it ...