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To: L. Adam Latham who wrote (169412)	8/14/2002 6:06:18 PM
From: L. Adam Latham	Read Replies (2) \| Respond to of 186894

All: online.wsj.com FASB has decided NOT to force stock option expensing (hooray!). But they will require the pro forma numbers to be printed in each quarterly earnings announcement, and not just in the annual report (a good compromise, IMO). The only hurdle now is Congress messing in this area where they don't belong. Adam FASB Proposes Three Methods For Expensing Stock Options By CAROL S. REMOND DOW JONES NEWSWIRES NORWALK, Conn. -- The board that sets the nation's accounting standards proposed new rules guiding how companies can expense employee stock options. The Financial Accounting Standards Board decided to put together draft guidelines, likely to become public in September, that would give companies choosing to expense stock options three alternatives to replace the one they now have. After a 30-day comment period, the new rules are expected to take effect by Dec. 15. Under the FASB guidelines, companies will have the following three alternatives to choose from: • The existing "clean slate" method, which allows companies to expense options granted since the beginning of the fiscal year in which they decided to begin expensing options. • An alternative under which companies would expense new options issued since the beginning of the fiscal year as well as the unvested portion of previous awards. • A retroactive restatement alternative under which companies would have to restate three years of prior statements to reflect options granted during those years, as well as unvested options granted in previous years. Until recently, few companies opted to account for stock options as an expense, as it reduces earnings. But calls for increased transparency in the wake of a number of accounting scandals have led more companies to announce that they would begin to expense options. The standard now under consideration by the FASB would continue to give companies the choice between expensing the fair value of the stock options using the three different alternatives available, or disclose their theoretical value in the footnotes of their financial reports. The board had contemplated at its last meeting to move the information containing the footnotes to the income statement, but decided Wednesday that it wouldn't be possible. Instead, the board decided that it would now require the pro forma net income and earnings per share information contained in the footnotes to be disclosed quarterly instead of once a year in the company's annual report. To promote transparency and make comparisons easier, the FASB also decided Wednesday to expand the disclosure required in the footnotes of companies' financial reports. Companies will now have to clearly state what option accounting method they are using and how they have accounted for options in the past in the accounting policy footnote. Board members also moved to increase disclosure in the option footnotes, requiring a table that will clearly show the pro forma impact of an expense recognized on the income statement over the last three years. The FASB adopted the current rules on the voluntary accounting of stock options in 1995. At that time, the board had hoped to implement reforms making stock option expensing mandatory, but Congress blocked the effort after intense lobbying by corporations.

To: L. Adam Latham who wrote (169412)	8/14/2002 6:07:45 PM
From: Amy J	Read Replies (4) \| Respond to of 186894

Hi Adam, RE: "Unless she's a computer nut, buying your girlfriend a laptop computer is kind of like buying your wife a vacuum cleaner for her birthday." No way... it's an excellent gift... the former is fun, the later is work. Even artists find computers fun today. RE: Not expensing options Glad they realized expensing options isn't the way to go. It wouldn't have addressed the core issue they were trying to address and it would have hurt innovation and impacted the employees rather than addressing Enron-kind-of-officers. It wouldn't have prevented Enron-style misbehavior by officers, and in fact, it would have made it so the top officers get the stock rather than employees. While that may not be an issue for other industries, it would have been a huge issue for the high-tech industry by negatively impacting innovation without addressing the real issue. Bryant did a great job articulating this in SJMN article the other week. The formula is: expensing options hurts innovation, thus high-tech. Regards, Amy J