Here's some information from technet.org regarding the tax code on expensing stock options:
TechNet Opposes IASB Stock Options Proposal
TechNet supports the existing financial accounting standard that requires footnote disclosure of the fair value of employee stock options. TechNet opposes the IASB proposal to require that employee stock options be recognized as an expense in income statements.
The International Accounting Standards Board (IASB), a private sector accounting standard setting body whose mission is the convergence of international accounting standards, has proposed to adopt an international accounting standard that will require companies to recognize employee stock options as an expense in income statements. This standard is not currently used anywhere in the world.
The IASB proposal ignores longstanding and accepted accounting rules for stock options. In 1993, the U.S. Financial Accounting Standards Board (FASB) proposed an accounting standard that would require companies to treat stock options as an operating expense and incorporate them into their income statements. Businesses, employees, institutional investors and others vehemently opposed this proposed standard. After hearing from all parties, the FASB arrived at a standard (Statement 123) requiring footnote disclosure of the fair value of employee stock options. This standard ensures that investors receive key information while companies do not expense the options. This standard has been successfully utilized in the U.S. since 1995. The IASB has now decided to reopen this issue by proposing that companies be required to recognize stock options as an expense in their financial statements.
The IASB should abandon its current position and instead advance global accounting standards by adopting the current U.S. model for treatment of stock options. Current FASB standard (Statement 123) has proven to be a workable and effective means of providing investors precise information about employee stock options while avoiding misleading expense charges in company income statements. If there is a need for an international standard on stock options, FASB’s Statement 123 is a proven and well-respected standard. The IASB should recognize it as such.
IASB’s proposal will create a widespread burden on the business environment – financial statements would be misstated, stock prices would drop, stock option plans would be scaled back and venture capitalists would finance fewer companies. At a time when investors and the markets in general require consensus, convergence of accounting standards and greater certainty, the IASB proposal would do precisely the opposite, generating a contentious debate and upheaval in the markets. The proposal also would have considerable adverse impact on today’s work force. Middle management and rank-and-file workers participate in most of today’s stock option plans. Forcing a charge against earnings would diminish the use of stock options, negatively affecting the workforce at a time of rising unemployment and considerable layoffs, without providing valuable information to investors and others. |
