House Panel Set To Rein In FASB On Options Rule
By a WALL STREET JOURNAL Staff Reporter
June 16, 2004; Page C3
online.wsj.com
WASHINGTON -- A House committee overwhelmingly approved a bill that would derail a plan by the nation's accounting-standards setter to require companies to count all stock options as business expenses.
The House Financial Services Committee yesterday voted 45-13 for a bill to restrict the expensing standard proposed by the Financial Accounting Standards Board to options granted to the top five officers of a company. The board had proposed expensing options granted to all employees.
The bill, introduced by Rep. Richard Baker (R., La.) now will go to the full House for consideration. After the hearing, Mr. Baker said the bill might be considered before the August recess.
Even if the measure is approved by the House, which isn't assured, it faces stiff opposition in the Senate. Senate Banking Chairman Richard Shelby (R., Ala.) has warned that Congress shouldn't meddle in rule-making by FASB, an independent accounting standards body based in Norwalk, Conn.
FASB, which recently proposed that all options be expensed, is expected to issue a final rule by the end of this year. The board attempted to require options expensing a decade ago, but withdrew the proposal under pressure from the Senate which was lobbied heavily by high-tech companies.
In addition, the bill would bar the Securities and Exchange Commission from enforcing the proposed FASB rule until the regulator studies its economic impact. The SEC would be given a year after the bill's enactment to complete the study.
The bill is co-sponsored by more than 100 other lawmakers from both parties. Proponents argue that the rule could stifle start-up companies, which rely on stock options to attract workers.
"We're going to let a job-creation tool be continued," said Mr. Baker.
But opponents said Congress shouldn't be getting into the business of setting accounting standards. As part of an effort to crack down on corporate corruption, Congress approved the Sarbanes-Oxley Act two years ago, which gave FASB more independence.
Trustees of FASB's parent organization, the Financial Accounting Foundation, warned Congress against politicizing the rule-making process.
"We believe that once Congress starts setting accounting standards through its political process, the integrity of U.S. accounting standard setting and the credibility of U.S. financial reporting will be dangerously compromised," the 16 trustees said in a statement issued Monday.
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