House Subcommittee Votes to Dilute Stock Option Rule

Share this content

Congress may once again stymie the Financial Accounting Standards Board (FASB) efforts to require companies to show stock options as an expense on company financial statements.

A decade ago Congress forced the accounting standards setting board to settle for footnotes in the financial statements addressing stock options. This time, Congress may end up requiring that only the options paid to a company's top five executives be shown as an expense.

The controversial FASB proposal was considered last week by a House Financial Services Subcommittee, taking up a bill sponsored by Rep. Richard Baker (R-LA) that dilutes the original FASB proposal. Baker's measure has the bi-partisan support of 100 co-sponsors and will go next to the full House Services Committee for a vote, Dow Jones Newswires reported.

The bill requires the options paid to the top five executives be shown as an expense and would prevent the Securities and Exchange Commission from enforcing the FASB rule until the SEC studies the economic impact, Dow Jones reported.

Passage of the bill would mark a partial victory for the FASB, which has long sought better accounting of employee stock options. However, the Senate version of Baker's bill does not have support. Senate Banking Committee, whose chairman, Republican Richard Shelby of Alabama, has pledged to block any legislation overriding the FASB's decision, Dow Jones reported.

Lawmakers are particularly concerned about the economic impact the expensing of options could cause. Stock options allow employees to buy shares at a fixed price and then sell them later at a profit if the company's stock rises, Dow Jones reported.

About admin


Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.