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July 27, 2004
House Backs Expensing of Options for Only Top Execs

The U.S. House of Representatives last week voted 312-111 in favor of requiring publicly traded companies to treat stock options granted to top executives as expenses, USA Today reports.

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The House measure would require companies to record only the stock options granted to the top five executives as expenses. The bill would override a plan by the Financial Accounting Standards Board, which wanted the value of all employee stock options to be deducted from net income.

The House legislation includes an exemption for some small businesses.

Tech companies, which had lobbied in support of the legislation, cheered the vote.

The legislation faces an uncertain future in the Senate, where critics of the legislation say a mandate to expense all employee stock options is necessary as a deterrent to accounting fraud, the newspaper notes.

"I'm going to fight it with every last bone in my body," Sen. Peter Fitzgerald of Illinois tells the newspaper. "It would be the biggest setback that American investors could suffer."

Under current rules, there is no requirement to treat stock options as expenses, but some companies have voluntarily done so in the wake of the recent corporate accounting scandals. The Financial Accounting Standards Board is reviewing a proposed rule that would require publicly traded companies to expense all employee stock options. The House measure, if it becomes law, would preempt the board's proposal.


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