Chicago (March 7, 2003) -- National accounting firm Grant Thornton has weighed in on the great stock option debate.The Windy City-based firm came out in favor of the expensing of stock options, which has once again become a hot-button issue as domestic and foreign rule makers consider changing the way companies account for the incentives. Currently, companies are not required to expense options, and those that opt to have more than one method of accounting for them. Part of the debate surrounding the issue is how to value options.
"The first time the issue was discussed in 1994, there was a lot of political maneuvering to make sure that stock options weren't expensed, and the industry didn't have adequate methodologies to record their cost," said Grant Thornton chief executive Edward Nusbaum in a statement. "But we're much more prepared today, and it's now the right time for the accounting profession to step up and really be committed to moving forward on expensing stock options."
Nusbaum contends that expensing stock options will improve the reporting of the true economics, and will put all incentive plans on an equal footing. However, he expressed concerned about the volatility estimates in the popular Black-Scholes options valuation model, particularly as it deals with small and midsized companies, and said it has requested that the Financial Accounting Standards Boards provide additional guidance in this area.
Last month, two of the Big Four firms, Ernst & Young and PricewaterhouseCoopers, came out in support of new rules that would force companies to count options as compensation.
However, Deloitte & Touche and KPMG haven't come out in support of their rivals’ position.
-- Electronic Accountant Newswire staff
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