The Financial Accounting Standards Board is set to meet today to discuss, among other things, equity-based compensation.

The touchy topic of stock options has been on the board's agenda on several occasions since it added the project to address issues related to equity-based compensation one year ago this month.

But it's of particular interest this time, because the board is due to release a long-awaited exposure draft this month that will determine whether companies will recognize compensation paid in the form of equity instruments (and other EBC arrangements) in their financial statements and how that type of compensation should be measured.

It's also of interest because this FASB meeting comes on the heels of the issuance of a draft rule by the board's overseas counterpart, the London-based International Accounting Standards Board, that requires companies that follow international accounting standards to expense stock options beginning Jan. 1, 2005.

The IASB standard, International Financial Reporting Standard 2, Share-based Payment, requires companies to reflect in their profit or loss and financial statements the effects of share-based payment transactions, including expenses associated with transactions in which share options are granted to employees. Prior to the issuance of that rule, there wasn't any international accounting standard covering the recognition or measurement of share-based payments.

Canada's Accounting Standards Board began requiring expensing for all public company employee stock-based compensation awards at the start of this year.

But back to the FASB. According to the board's Web site, it estimates a one-hour discussion today regarding transition issues "as well as certain other issues that may arise during the drafting of the proposed statement."

The ultimate goal of the FASB project is to cooperate with the IASB to establish convergence to a single global accounting standard on EBC that would be followed by all companies applying U.S. GAAP and international accounting standards.

It will be interesting to see how the FASB exposure draft, when it is eventually released, compares to the IASB proposal. Convergence on this issue will be no small feat. It will probably be more interesting to see the reaction of members of the business community who will be affected by the outcome of FASB's countless hours of deliberating on the issue. But of course, that still won't be the end of the discussion on stock options. The board will still have to issue its final statement, which it expects to do in the second half of 2004. And then, companies will eventually have to adopt the final standard, which means we could still be discussing the issue of stock options this time next year.

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