High-flying companies threatened by profits nosedive in share options

One in five large companies could see their profits plummet by more than 10% under controversial plans for a new accounting standard on share options, new research has revealed.

The survey of 65 major European companies by HSBC also found that a further two in five would have to add a charge of more than 5% to their profit and loss account.

In the first study of its kind to be made public, analysts at the banking giant this week published calculations of what companies will lose under controversial proposals issued by the Accounting Standards Board.

Under the plans, companies will charge the cost of issuing shares under share option schemes to their profit and loss accounts. No timescale has been given for their introduction. In one ‘reasonable worse case’ scenario, Marconi would see its profits plummet by #129m or 29% a year, HSBC said.

But it was ARM Holdings that would experience the largest effect. The microprocessor specialist would have to charge equivalent to 110% of its net profit to its p&l account annually.

Other companies set to lose around 10% of profits include ING, Alcatel, Pearson, Reuters and Tesco. British Airways, which is about to resume Concorde test flights, will be hit be a charge of around #11m, the research said.

No dotcoms were included in the survey, although it was arguable these companies brought the issue to the forefront by increasing the popularity of share options.

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