That Standard is effective for fiscal years beginning on or after April 1, 2006. It requires entities to recognize a cost of labors based on fair value of stock options.
Entities must estimate total cost of stock options based on the fair value at the grant dates and the estimated number of exercisable options.Then, the total cost should be recognized over the vesting periods. Stock options are accumulated and presented in net assets separately from shareholders’ equity. [Note: Shareholders' equity is displayed as one major component included in net assets.]
Stock options are transferred into paid-in capital when exercised, or recognized as a gain when expired without exercise.
It would be noteworthy that fair value measurement for stock options is introduced into J-GAAP. However, there are still some differences between J-GAAP and IFRS:
- Stock options are displayed in net assets but excluded from shareholders' equity.
- Stock options that are expired without excercise are reversed into net income.
- Stock options issued by non-public companies are accounted by the "intrinsic value method," but no remeasurement is required as of each balance sheet date.