Washington (July 22, 2004) -- The Financial Accounting Standards Board's controversial plan to mandate that companies expense options for all employees hit a major roadblock this week, as House lawmakers this week passed a bill that would delay the FASB plan and would limit the expensing of stock options to those granted only to the top five officers of a company.
House members voted 312-111 in favor of H.R. 3574, the Stock Option Accounting Reform Act. The bill, which passed the House Financial Services Committee last month, would limit expensing to a company's chief executive and four most highly compensated executive officers, and would delay the implementation of any rule related to the expensing of stock options until an economic impact study is completed. It would also exempt small business (issuers with annual revenues of less than $25 million) and would allow newly public companies to delay expensing for three years from the date they go public.
The bill would also require the Securities and Exchange Commission to develop enhanced disclosure requirements related to stock option plans, stock purchase plans and similar arrangements.
In March, FASB released an exposure draft of a rule that would require publicly held companies to expense the stock options that they give employees starting Jan. 1, 2005. Private companies would have until Jan. 1, 2006, to start expensing stock options. The board is expected to issue a final rule on options sometime during the fourth quarter.
-- WebCPA staff
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