Norwalk, Conn. (April 24, 2003) -- Ending nearly a decade of controversy and debate, the Financial Accounting Standards Board voted unanimously that stock-based compensation should be recognized as an expense in income statements and amounts recorded at fair value measured at the grant date.
The decision reached this week ended years of heated pro-con arguments over accounting for stock options. Expensing stock options was proposed in the mid-1990s, but intense lobbying efforts — particularly from the high-tech sector — forced FASB to retreat from its position that stock options should be expensed.
However, since the Enron and WorldCom scandals, an increasing number of companies have converted to expensing stock options.
However, Sen. Barbara Boxer, D-Calif., a staunch opponent of expensing stock options said, “Given FASB's history on stock options, I am not surprised that they ruled to expense them. However, FASB admits that it doesn't take into account the economic impact of its decision. Therefore, I will work hard to pass the Ensign-Boxer bill which will be introduced shortly. This bill will send this whole matter to the SEC for review before the proposed rule goes into place and we are dealing with its unintended negative economic consequences.”
The board hopes to publish draft rules by the end of 2003. Elsewhere, the International Accounting Standards Board indicated that it would issue similar rules on share-based payments also by year-end.
-- WebCPA staff
