BusinessCompany NewsFASB to decide on stock options formula

FASB to decide on stock options formula

US regulator, the Financial Accounting Standards Board, is expected to make a decision shortly on how stock options should be accounted for on the balance sheet.

Link: Coca-Cola to book cost of stock options

The decision is to be taken following the announcement by several major companies, including Amazon, General Electric and Coca-Cola, that they would now account for stock options as an expense on the balance sheet. The majority of companies still only account for stock options as a footnote to the annual report, so they do not affect the bottom line.

But, according to comments made by FASB chairman Bob Herz, reported in the FT, the organisation will decide whether to adopt a cumulative approach, giving companies time to alter their options plans and lessen the impact on profit or whether to book the full effect from the outset.

A formal proposal could then follow, to be made by the International Accounting Standards Board, as early as the fourth quarter of 2002.

In an earlier release, the FASB ‘applauded’ those companies that had changed their accounting policies on stock options.

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