PracticeConsultingBig business upset with ASB proposals

Big business upset with ASB proposals

Leading companies have hit out at the UK standard setter for its controversial proposals to make them show share option costs in the profit and loss accounts.

A number of FTSE-100 companies have written to the Accounting Standards Board to express their concern and resistance to the plans, which business claims will cause too much fluctuation in their profit and loss accounts.

Under the proposals the cost will be borne by the shareholders and not the company, according to opponents. Critics have also expressed concern over the commercial impact of a non-level playing field against US competitors.

It is understood that BT, Vodafone, Logica, all in the FTSE-100, and a number of internet start-ups are among the most vociferous opponents to the plan. A rising number of cash-strapped dot.coms have over the years adopted the practice of issuing share options to attract the best employees.

This is what the ASB wants to ‘nip in the bud’ before it escalates. Resistance to the proposals on accounting for share based payment comes as no surprise.

‘This will be a big one,’ said Sir David Tweedie, outgoing ASB chairman.

The discussion paper was devised by the most influential group of global standard-setters and is been proposed simultaneously in all five countries.

Currently share options offered to employees as a means of payment are not reflected in profit and loss accounts, but the new proposal would mean treating the cost of shares as an operating expense, thus reducing operating profit.

The ASB proposal would ensure that financial statements reflect more accurately their remuneration costs to investors.

In contrast to the 33 objections, 13 companies wrote to the ASB backing the proposal, while an undisclosed number supported it in principle, but criticised the method of measurement.

In addition, the ASB has received support for its plan from investors, the National Association of Pension Funds and the Association of British Insurers which together control more than half of the UK stock market.

Although it was Sir David began the emotive and controversial topic of accounting for share options, it will be ASB chairman-elect Mary Keegan, a PricewaterhouseCoopers senior partner, who will take the debate forward next year.

Links

Banking sector attacks ASB plans

PwC partner named ASB chairman

ASB ends year with more revised rules

Concern voiced over FRS 17 volatility

ASB stands firm with new standard

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