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The Impact of Expensing Stock Options
on the Tech Industry
April 29, 2004
The Financial Accounting Standards Board (FASB) recently issued a draft rule that would require companies that offer stock options to their employees to account for these options on their balance sheets. What may seem like an arcane accounting rule to some has become the focus of an intense battle between those who feel this new rule could negatively impact the overall health of the tech sector and the economy in general and those who support the FASB's proposal as a common sense accounting change that will help clarify for investors a company's real revenues and expenses. Proponents of the FASB rule argue that expensing does not change in any material fashion a company's bottom line and is an important step towards providing greater transparency to corporate operations consistent with several other corporate governance changes made in the wake of the Enron and other accounting scandals. Opponents of FASB's action counter that there is no agreed upon method for expensing options and that whatever number is used will, therefore, provide little transparency, only heighten investor confusion. Opponents further argue that requiring the expensing of options will result in companies eliminating such employee incentive programs to the detriment not only of workers but to the companies as well, as they will be harder pressed to attract talented people without this incentive. It is ironic, they point out, that companies in China have started using stock options to attract employees at the same time the Unites States risks abandoning such a program. This argument is viewed as unfounded by supporters of the FASB rule, who counter that a requirement to expense options should have nothing to do with a company's decision whether or not to offer options to its employees. Featured Speakers
Karen Kerrigan - Chairman of the Small Business Survival Committee (SBSC)
Roberto G. Mendoza - Co-founder and Chairman of IFL Dick Grannis - Vice President and Treasurer of QUALCOMM Incorporated Are we missing something? If you are aware of a link, report, article or speech that should be included below, please visit our message board and let us know.   Financial Acct. Standards BoardSmall Business Survival Committee | Karen KerriganInternational Employee Stock Options Coalition
SENATE
 S. 1890 "Stock Options Accounting Reform Act" (introduced by Michael Enzi, (R-WY), 8 co-sponsors)
This bill would require stock options granted to executive officers to be expensed for accounting purposes.S. 182: "Ending the Double Standard for Stock Options Act" (introduced by Carl Levin (D-Mich.),3co-sponsors) This bill mandates that corporations must list stock options as expenses if they take a tax deduction on stock options.  S. 979: "Broad-Based Stock Option Plan Transparency Act of 2003" (introduced by Mike Enzi (R-Nev.), 17 co-sponsors)
This bill calls for a three-year study by the SEC on expensing stock options, ultimately delaying FASB's decision on whether to expense stock options or not. This bill would increase disclosure of stock options in place of expensing stock options. S. 206: (introduced by Pat Roberts (R-Kan.), 10 co-sponsors)
This bill would prohibit stock options and employee stock purchase plans from being included in the definition of wages.
S. 690: "Prevention of Stock Option Abuse Act of 2003" (introduced by Ron Wyden (D-Ore.), 0 co-sponsors) This bill prevents corporations from issuing stock options to top management that would be detrimental to shareholders in the long run.
HOUSE
HR 3574 "Stock Options Accounting Reform Act" (introduced by ,Richard Baker (R-LA), 7co-sponsors) The "counterpart" bill of S. 1980. This bill would require stock options granted to executive officers to be expensed for accounting purposes. H.R. 626: "Ending the Double Standard for Stock Options Act" (introduced by Pete Stark (D-CA), 8 co-sponsors) The "counterpart" bill of S. 182. This bill mandates that corporations must list stock options as expenses if they take a tax deduction on stock options.
 HR 1372: "Broad-Based Stock Option Plan Transparency Act of 2003" (introduced by David Dreier (R-CA), 35 co-sponsors) The "counterpart" bill of S. 979 This bill calls for a three-year study by the SEC on expensing stock options, ultimately delaying FASB's decision on whether to expense stock options or not. This bill would increase disclosure of stock options in place of expensing stock options.
H.R. 286: (introduced by Amo Houghton (R-NY), 28 co-sponsors)
The "counterpart" bill of S. 206. This bill would prohibit stock options and employee stock purchase plans from being included in the definition of wages.
Remarks by Chairman Alan Greenspan on "Stock Options and Related Matters," 05/03/02What are Employee Stock Option Plans?Wyden Proposes Stock Option Rules
SIA: Stock Option Expensing Rule Still Unworkable
New, More Realistic Analysis Reflects Stock Expensing Trend & Pending FASB Stock Expensing Rule
Firms brace for options rules
Reuters Summit-High-Tech Execs Brace for Expensing Stock Options
Valuing the Volatility
FASB Limits Stock Options
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