New York (Aug. 23, 2004) -- The Financial Accounting Standards Board reportedly reaffirmed the basis for classifying stock option pay as equity, not a liability, effectively ruling out the possibility that companies would be able to adjust options expense to reflect how much employees actually get.

While some analysts have argued that companies should book options as a liability -- an approach that would enable companies to account for changes in the value of the options over time -- the FASB plan, viewing options as equity, would force companies to record options on their income statements with a grant-date estimate, Dow Jones and the Associated Press reported.

At its meeting last week, the board also changed its guidance on how companies should attribute the cost for employee stock option awards with graded vesting (awards for which different parts vest at different times), reported. After eliminating a straight-line-amortization option, the board reversed course and chose to include it in response to criticism from some companies, said.

FASB has been meeting to address questions and concerns about its proposed stock-based compensation standard. At its meeting Wednesday, the board plans to discuss issues related to employee stock purchase plans, income taxes and reporting cash flows.

-- WebCPA staff

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