US companies ignore stock options threat

Link: FASB to decide on stock options formula

Of the 200 companies polled by human resource consultants Mercer, 80% said they expected a rule to be adopted sometime between January 2004 and September 2007, but just 37% said they had considered the impact of such a rule change.

Only 5% of companies said they would actively lobby against such a measure.

Under the current rule – Statement of Financial Accounting Standards 123 – companies must disclose the fair value of stock options as a footnote to the annual accounts, but the Financial Accounting Standard Board, the US standard-setter, is believed to be considering changing the rule to make stock options a mandatory expensing item.

A number of big American companies have already begun including stock options as an expense in their accounts including Amazon, Coca-Cola, General Electric and Computer Associates.

Martin Katz, a senior executive at Mercer said: ‘There’s a diversity of opinion about what should be done – with everyone from the SEC to Congress weighing in on the issue – but there is strong consensus in corporate America that stock option expensing will happen over the next five years.’