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October 19, 2004
Companies Get More Time on Stock-Option Rule

The Financial Accounting Standards Board has voted to give companies another six months to comply with a rule requiring employee stock options to be treated as an expense, the Washington Post reports.

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The board voted 5-3 to approve the delay, giving publicly traded companies until June 15 to comply with the new rule--and six months for lobbyists to urge Congress to block the rule before it becomes effective.

"A lot can happen with an additional six months--a lot can happen legislatively, a lot can happen at the SEC," says Jeff Peck, a lobbyist for the International Employee Stock Options Coalition. "The political landscape could look very different in six months."

The board wants all publicly traded companies to treat all the stock options they grant to employees as an expense.

Critics of FASB's rule contend the rule would lead to fewer companies offering stock options to employees, which they say would hurt recruitment and retention.

Supporters of the rule say a mandate to expense employee stock options is necessary as a deterrent to accounting fraud.

The newspaper notes that the House of Representatives has passed legislation that would preempt the board's rule. The House bill would require companies to expense only the options they grant to the top five executives. A similar measure in the Senate faces strong opposition.


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