Washington (July 13, 2004) -- Financial Accounting Standards Board chair Robert H. Herz made another trip to Capitol Hill in an effort to urge congressional leaders to oppose House legislation that would thwart the board's proposal to mandate stock potion expensing.


In testimony before a House subcommittee last week, Herz defended FASB's controversial proposal to expense all employee stock options and urged members of the House Commerce, Trade and Consumer Protection Subcommittee to oppose H.R. 3574, which would only require companies to expense options granted to their top five executives and would exempt certain small business issuers.


"The provisions of H.R. 3574 are seriously flawed, violate fundamental concepts of financial accounting and reporting, and, if enacted, would be harmful to the overall capital market system," Herz said in his July 8 testimony.


He continued, "H.R. 3574 would establish a dangerous precedent, in that it would send a clear and unmistakable signal that Congress is willing to directly intervene in the independent, objective and open accounting standard-setting process based on factors other than the pursuit of sound and fair financial reporting," Herz said. "That signal would likely prompt others to seek political intervention in future technical activities of FASB."


Herz noted that the board plans later this month to begin its public redeliberations of its proposal to address certain issues, including the relevant measurement attribute and relevant measurement date for equity-based compensation; the appropriate basis for attribution of compensation cost; what disclosures should be required; the appropriate transition and effective date for the new requirements; and what modifications, if any, to the new requirements should be made for small businesses.


While the board currently plans to issue a final standard during the fourth quarter, Herz noted that the board "has no fixed deadline for issuing a final standard and will continue its public redeliberations as long as is necessary to develop a high quality and cost-effective accounting standard that will best serve the needs of investors, creditors and other consumers of financial reports."


-- WebCPA staff

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