GAAP and IFRS

Options Bill Could Face Vote Today

H.R. 3574, aimed to block provisions of a FASB proposal, is expected easily to pass a vote in the full House.
Stephen TaubJuly 20, 2004

A bill aimed at blocking provisions of a Financial Accounting Standards Board (FASB) proposal, which would require companies to expense employee stock options, may come to a vote in the House of Representatives as early as Tuesday, according to TheDeal.com.

H.R. 3574, the Stock Option Accounting Reform Act, is expected easily to pass a vote in the full House, reported the website; last month it passed 45-13 in the Financial Services Committee.

The bill would demand an economic impact study before FASB is permitted to implement its proposed rule and would require companies to expense only stock options granted to the top five officers. Small businesses would be entirely exempt from FASB’s rule; newly public companies could forgo expensing for three years.

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According to wire-service reports, the bill’s chief sponsor, Rep. Richard Baker (R-La.), said that the bill is designed to protect stock-option plans used by smaller companies to attract employees while decreasing the likelihood of stock-option abuses involving a company’s top five officers.

The website also reported that Rep. Cliff Stearns (R-Fla.), chairman of the Commerce, Trade, and Consumer Protection Subcommittee, said Friday he is considering introducing his own legislation on stock-option accounting. Stearns did not elaborate on his plan, TheDeal.com added.

The website also pointed out that Stearns is proposing an amendment to Baker’s bill, which would allow companies that voluntarily expense all employee options to continue doing so.

“At a recent hearing I held on stock option expensing, the chairman of the Financial Accounting Standards Board testified that 576 companies are currently expensing options,” Stearns reportedly said. “As it now stands, H.R. 3574 would prevent these companies from continuing to voluntarily expense stock options.”

The bill is expected to face tough opposition in the Senate.

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