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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs -- Ignore unavailable to you. Want to Upgrade?

To: hueyone who wrote (203)	8/17/2002 11:45:28 AM
From: jt101	Read Replies (1) \| Respond to of 786

hueyone, I am totally with you on this expensing issue. IMO, as you also suggest, they are adopting a slow, cautious but effective way to make sure stock options are expensed. I would like to believe, the 6+ trillion wealth transfer from J6P to company insiders via WallStreet as a conduit, has given FASB enough courage/confidence to force the issue, no matter how strong the objections are from tech executives. In a way, IASB guidelines are like an additional bonus to FASB. I would like to see Paul Volcker be appointed as a member of accounting oversight board, as IMO, he is the right person for the job and also as he heads the current IASB, assuming he is interested. FASB/SEC should also say, if one is not comfortable with any accepted methodology to expense stock options, one shouldn't issue stock options, and instead give restricted stocks and/or raise money via secondary and distribute the proceeds. I think, this is too much to ask going by the past... IMO, if the govt. decides to eliminate/reduce the double taxation on dividends, it will affect all these advocates of pro-forma/not-expensing-stock-options gurus adversely.

To: hueyone who wrote (203)	8/18/2002 3:07:11 PM
From: rkral	Respond to of 786

An Aug 7 article re FASB not previously posted. The highlights are mine. >>> Rulemakers Address Options Board May Require Clearer Disclosure of Grants' Impact NORWALK, Conn., Aug. 7 -- The board that sets U.S. accounting rules agreed today to explore requiring all companies to disclose more prominently the impact of stock options on earnings, a move that one member acknowledged would invite a "maelstrom" of criticism from business groups. The Financial Accounting Standards Board (FASB) directed its staff to research the implications of the requirement, which would fall short of mandating that companies treat stock options as expenses but would force companies to disclose the bottom-line impact of the options [edit to caps: ON THE FACE] of the income statement. Currently, companies are required to disclose the cost of options in a footnote, which is typically at least several pages behind the income statement. "Up until recently, nobody looked at the footnote," said FASB Chairman Robert H. Herz. "I always kind of wondered if putting something like this in the footnote gets it done." In addressing the disclosure of stock options, the seven-member FASB made a surprise leap today into the much larger controversy over how companies treat and disclose the cost of stock options. The last time the board visited the issue, in 1993, political and business pressure forced it to back down. "If we're going to do this, we better, by God, be willing to do this," said FASB board member John M. Foster "I'm tired of floating up these balloons and then we get a bunch of comments and we say we didn't mean it." The board's tentative action on stock-option disclosure is part of larger initiative by FASB to get a handle on the evolving issue of accounting for options, particularly as it relates to the growing number of companies that are electing to treat stock options as an expense. Some board members objected to including the disclosure requirement -- which would apply to companies that don't elect to treat options as an expense -- in their deliberations. These members worried that business-lobby opposition could derail or delay action on the more narrow effort to revamp accounting rules for companies that volunteer to treat options as an expense. "To muddy this up with this other thing is inappropriate," said G. Michael Crooch, one of two FASB board members who opposed researching the new disclosure requirement. Few companies chose to treat the options as expenses until scandals at Enron Corp. and other companies caused widespread concern over the opaqueness of corporate America's books. More than two dozen companies have now pledged to start counting the options as expenses, including General Motors Corp. and Citigroup Inc. this week, prompting the FASB to revisit its rules for companies that make the switch. But many companies still object to any attempt by the FASB to force them to treat options as expenses, which could cost some companies millions of dollars. The current guidelines for companies that voluntarily treat stock options as an expense require that grants issued from the beginning of the year in which the change is made be subtracted from earnings. At the time the guidelines were issued, the FASB did not require companies to count all outstanding stock awards, which would have caused companies to take a bigger hit against their earnings. Although the board made no formal decision today, a majority agreed that companies should be allowed to choose between three methods. The first, which is the current rule, would allow the expense only of grants awarded in the year the switch is made. Second, companies could count both new grants and outstanding, unvested options in the first year options are treated as expenses. Lastly, companies could retroactively restate their annual results going back to 1995 to reflect the cost of options in each of those years. FASB board member Edward W. Trott said companies that have volunteered to make the switch should not be penalized with more onerous accounting requirements. "My objective is to have a transition that encourages the switch," he said. "It would seem to be unfair to take away what is currently written in the document that people have made decisions on." The last time the FASB took up the issue of stock options, opposition to a proposed expense rule led to a 1995 compromise that required companies to disclose the value of stock options in the footnotes of their financial reports. It also established guidelines for companies that elected to treat the options as expenses, guidelines that will probably be changed. The board, pending staff research that could have an impact on the final rule, has set a deadline to have the new rules in place by the end of the year. That would be an extremely quick response for a board that has been criticized for moving too slowly to address rapidly evolving accounting issues, such as strategies used by Enron to hide massive amounts of debt. But G. Peter Wilson, an accounting professor at Boston College, said the political winds are now in favor of the FASB. "It's clear the FASB has wanted to have more stringent rules on the expensing of stock options," he said. "And there's a lot of pressure now to do that." © 2002 The Washington Post Company <<< washingtonpost.com I especially like Foster's "floating up balloons" comment. As to not counting "all outstanding stock awards", I hope that's a reference to amortization or counting only above-water options when calculating diluted EPS .. something we already know about. We don't need a negative surprise right now. Ron