Washington (July 2, 2004) -- Comptroller General David M. Walker this week weighed in on the ongoing fight between the Financial Accounting Standards Board and Congress over stock option expensing, and urged congressional leaders to stay out of accounting standards-setting.
"We recognize that this is a complex and controversial issue on which reasonable people can and do disagree. In light of the above, there has been a renewed interest for the Congress to legislate accounting rules for stock options," Walker wrote in a June 28 letter to the leaders of the Senate Committee on Banking, Housing and Urban Affairs. "Notwithstanding our and others’ views on the merits of various accounting methods for stock options, we believe that the principle of independence, both in fact and in appearance, is essential to the credibility of and confidence in any authoritative standard-setting processes."
Congressional leaders, led by Rep. Richard Baker, R-La., moved to block the FASB plan, which would require all options to be expensed, by introducing legislation that would require companies to expense only options granted to their top officers and would require an economic impact study of mandatory expensing before any standard could take effect.
The bill, H.R. 3574, known as the Stock Option Accounting Reform Act, which has 124 co-sponsors, was approved by the House Financial Services Committee earlier this month. The full House is expected to consider it later this summer.
"We note that FASB has an established process in place to obtain feedback from its constituent groups," the letter continued. "These processes were established in order to balance the competing interests and demands of the various groups while providing standards that promote transparent, credible and comparable financial information."
"In our opinion, FASB’s independent standard-setting process, subject to Securities and Exchange Commission oversight, should be allowed to proceed in its consideration of accounting for stock options," Walker concluded.
The board recently held two public roundtable meetings on its exposure draft in Palo Alto, Calif., and at its office in Norwalk, Conn. The comment period of the ED ended June 30.
While the FASB rule is slated, if approved, to take effect Jan. 1, 2005, for public companies, FASB member Michael Crooch reportedly said this week that the board will "take requests for delay into consideration," according to a report by TheDeal.com.
-- WebCPA staff
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