Congress Likes Compromise Solution On Stock Option Expensing

from the compromises dept

While the Federal Accounting Standards Board has been planning to force companies to start expensing stock options, Congress appears to have other plans. A committee voted on a new bill that would block FASB's ruling and put in place more of a compromise solution that sounds almost exactly like the proposal Intel's Craig Barrett made two years ago. Instead of expensing all options, just expense those of the top five executives of each company. This way, companies aren't penalized for giving stock options to everybody else. Of course, it still seems like the whole discussion is overblown. It's really just shifting a few accounting numbers around -- and anyone who can do a little math can figure out the impact on financial statements for comparison purposes. It's still unclear why FASB is so insistent on expensing options, when doing so will actually make financial statements even less accurate. Most of the info (other than price, which is pretty much made up on the spot) is already in financial statements, so it's unclear what benefit there is to adding an arbitrary price to the options. This proposed law still has a way to go, however, and some powerful forces are very much against it. As with so much in Congress, expect plenty of heavy lobbying and the end result to probably be a lot less reasonable.

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  • identicon
    Anonymous Coward, 16 Jun 2004 @ 5:50pm

    Keep FASB independent

    The real issue here is Congress overriding FASB. For investors to have confidence in financial statements, accounting standards need to be set by an entity that is not subject to political whims.

    reply to this | link to this | view in chronology ]

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