FASB Stock Option Rules Subject of House Bill

If RSA Security Inc. had to record the stock options it gives to 80 percent of its workers as expenses, its $14 million profit in 2003 would have instead been a $21 million loss. If the Financial Accounting Standard Board (FASB) prevails with new stock option rules, that’s exactly what will happen to some companies.

This month, FASB is expected to propose new rules to require options be shown as an expense as opposed to a footnote in financial reports, the Wall Street Journal reported. The footnote compromise was reached a decade ago after Congress reacted in an uproar over stock-option accounting.

Rep. Richard Baker, R-LA, chairman of the House capital markets subcommittee, told the Journal he anticipates a vote later this year that would require further study before FASB makes changes to the stock option rules.

RSA Security Inc. Chief Executive Arthur Coviello the bill "must-pass legislation" for technology companies, the Journal reported.

"What FASB's proposing is not a middle ground," Rep. Spencer Bachus, R-AL, told the Journal. He suggested that the FASB's approach would stop the use of employee stock options, shock stock markets and "have broad-based, negative effects" on the overall economy.

"Small firms are going to take a direct hit to the bottom line" without protections afforded by the bill, testified Karen Kerrigan, chair of the Small Business Survival Committee.

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