Indian practice of granting stock options to employees was started in the late 90s by the companies in the information technology sector. But, there was no accounting pronouncement to guide the companies about reporting of ESO practice. Ambiguity associated with the stock option compensation disclosure requirements prompted the Indian securities regulator, SEBI to publish guidelines (ESO Scheme and Employee Stock Purchase Scheme Guidelines, 1999) seeking to achieve disclosure consistency and comparability. The said guidelines were further amended in 2003 and 2004 to incorporate a few changes. The major amendments in 2003 relate to the requirements of pro forma disclosure of the fair value of option grant and the impact of fair value measurement on reported EPS. As the amended provisions of pro forma impact disclosure are applicable to ESO schemes framed after June 2003, a company may not make disclosure for schemes framed before June 2003. The amended guidelines inter alia provides for disclosure of following major items in the directors’ report of the