S.D. Admin. R. 20:06:19:05

Current through Register Vol. 51, page 67, December 16, 2024

Section 20:06:19:05 - Accounting procedures for the purchase of call and put options

Accounting procedures for the purchase of call and put options must be in accordance with the following principles:

(1) Payment for call or put options will be recognized as a deferred asset;

(2) Treat call or put options not exercised prior to expiration as a sale of the option on the expiration date and recognize the loss as a capital loss;

(3) If a call option is exercised, add the consideration paid for it to the purchase price paid for the underlying securities and treat it as a capital expenditure;

(4) If a put option is exercised, deduct the consideration paid for it from the price received for the underlying security and treat it as reduction of proceeds;

(5) If a call or put option is terminated through a closing sale transaction, treat the difference between the consideration paid for the purchase of the call or put option and the consideration received for the closing sale transaction as a capital gain or loss.

S.D. Admin. R. 20:06:19:05

13 SDR 75, effective 12/21/1986.

General Authority: SDCL 58-4-1, 58-27-7.

Law Implemented: SDCL 58-27-7.