No. of Recommendations: 5
More Logic on Options

Wednesday, April 7, 2004

LAWMAKERS CONSIDERING whether companies should be required to report the value of employee stock options as expenses on their corporate balance sheets might want to take a look at a new report on the topic from their own budget office. The Financial Accounting Standards Board, the private body that writes rules for the accounting industry, has just proposed a rule -- more than a decade in the making -- that would require companies to show the fair market value of options as expenses. Anti-expensing forces, led by high-tech firms that rely heavily on options to attract employees, are pressing a measure in Congress that would block the FASB rule from taking effect. The Congressional Budget Office analysis of the issue is therefore timely -- and just as important, it's written in language understandable to those without advanced accounting degrees....

...Those fighting the new rule dismiss the CBO report, saying the nonpartisan budget office isn't known for its accounting expertise. But the accounting experts -- at the FASB and at its international counterpart, as well as the leading accounting firms -- support expensing. Opponents of expensing also claim that Congress must act because the green-eyeshade types aren't taking into account the devastating effect they say expensing will have on the economy; the legislation they are pushing would block the FASB rule while an economic impact study is conducted. Yet the CBO says requiring expensing "is unlikely to hurt the overall economy" and in fact could make it more productive. The anti-expensing forces are running out of arguments.
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