The current standard for reporting share-based payment transactions is the Statement of Financial Accounting Standards Number 123 revised which supersedes SFAS#123 and Accounting Principles Board opinion No. 25. SFAS#123R requires all publicly traded companies that issue stock options in place of wages to base the compensation cost on the fair value of the option when it is granted and to report the estimated compensation expense on their income statements. The standard allows companies to use either the fair value method created by Fisher Black and Scholes or the binomial lattice model. Both models use the current stock price, risk-free rate of interest, the strike price which is the price that the employee can buy the company stock at, the dividend yield, volatility of company’s stock price and the terms of the option as inputs (Schroeder, Clark, & Cathey, 2005). The fair value of the option granted to the employee will be evaluated annually to the end of the vesting period of the option. Non-public companies are also required to use the fair value method for pricing options, unless there is no way to measure that value. In its place private companies can use their industry sector index as a measure for valuing options. This standard was put into place because APB opinion #25 allowed companies not to report compensation cost at the granting of the option and the original SFAS#123 only required companies to disclose compensation cost in the footnotes and voluntarily in the financial statements based on their intrinsic costs of the options and not their fair value. This created financial statements which overstated income and understated expenses because options were not accounted for at their fair value (Summary of Statement No. 123 (revised 2004), 2012). The new standard builds on the FASB’s conceptual framework that financial reporting should provide