Coca-Cola Satisfies Wall Street by Expensing Stock Options
"Our management's determination to change to the preferred method of accounting for employee stock options ensures that our earnings will more clearly reflect economic reality," said  Coke chairman and chief executive Douglas Daft.
Had Coca-Cola options been expensed last year, the company's net income would have been reduced with an effect of $.09 on earnings per diluted share.
Coke's largest shareholder, Warren Buffett, has argued that the existence of stock options has induced many executives to doctor financial reports in order to inflate the price of company shares. Enron executives, for example, received tens of millions of dollars by cashing in stock options while their company's financial statements showed false information.
"I think accounting generally, in recent years, has deteriorated and it's done so with the help of management," said Mr. Buffett, who is a member of the boards of directors of Coca-Cola and The Washington Post.
While these companies voluntarily choose to report options as current expenses, the issue may soon become moot as Congress is considering making such an act a requirement. Senators Carl Levin and John McCain have co-sponsored a bill that would require companies to report stock options as compensation on their financial statements, however the Senate defeated that proposal last week. Senator Levin plans to continue the fight by making the stock option recognition an amendment to Senator Sarbanes's corporate reform bill which was passed  this week.