A House of Representatives subcommittee passed a bill that would significantly water down the Financial Accounting Standards Board’s proposal requiring companies to expense stock options.
H.R. 3574, the Stock Option Accounting Reform Act, was passed in the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. The bill would require the Securities and Exchange Commission to complete an economic impact study before FASB is permitted to implement its proposed rule.
In addition, the bill would require companies to expense only stock options granted to the CEO and the next four highest-paid officers. Small businesses would be entirely exempt from FASB’s rule; newly public companies could forgo expensing for three years.
The chief sponsor is Richard Baker (R-La.); the bill has 107 co-sponsors in the House. “Today’s strong bipartisan vote is a clear first victory for finding an approach to this issue that doesn’t throw the baby out with the bathwater,” said Baker in a statement. Countered Rep. Paul Kanjorski (D-Pa.), “We have to be careful we don’t become the appellate court for FASB.”
The bill still must be approved by the full Financial Services Committee, chaired by Michael Oxley (R-Ohio), before it goes to the House floor, according to TheDeal.com.
The website noted that a companion bill introduced by Sen. Mike Enzi (R-Wy.) has received scant support and that the Senate leadership has shown little interest in overruling FASB’s initiative. Senate Banking Committee chairman Richard Shelby (R-Ala.) has been a very strong, vocal supporter of FASB, stressed TheDeal.com, and he has pledged to block any legislation that threatens the board’s independence or overrides its proposed rule.
Added Sen. Peter Fitzgerald (R.-Ill.), a former commercial banking attorney: “My friends on the House subcommittee are misguided in seeking to overturn this important accounting reform. Should their bill clear the full House, I will do everything I can to block it in the Senate.”