Hundreds of companies have pushed forward the vesting date of employee stock options to avoid treating the options as an expense under a new accounting rule whose deadline looms, the Washington Post reports.
In general, the deadline for companies to begin treating employee stock options as an expense is January 1.
Bear Stearns analyst Chris Senyek says more than 400 companies have pushed forward the vesting date for employee stock options to avoid treating them as an expense on financial reports.
"This is simply a tactic by companies to lower their expenses and artificially inflate their earnings," Senyek tells the newspaper. "It's smoke and mirrors."
Among the companies that moved forward the vesting date of employee stock options are newspaper publisher Gannett Co., Applera Corp., and Ciena Corp., the newspaper reports. By doing so, Gannett Co. says it avoided $52 million in future expenses, according to the newspaper.
The companies are defending their decision, arguing that competitive factors forced a move.
"If we had a half-a-million-dollar compensation hit, that would really lower our earnings. And how would we have been perceived against people who didn't have that expense?" says Steven R. Delmar, chief financial officer at Ace-Comm Corp. "We probably spent a good six months, between myself, legal counsel, accounting, and the board, sort of researching and analyzing this and taking a look at what other companies were going to do ... It was not an easy decision. And I'm not sure there is one right, easy decision on this."