|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
Stock Option Expensing Coming In 2006
Staff Writer
AccountingWeb.com. November 29, 2005
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EXCERPT: American companies with fiscal years ending December 31, 2005 will start expensing their stock options in 2006. This newly required reporting is expected to drop company net income figures noticeably. The Financial Accounting Standards Board (FASB) has been working to require American public companies to account for the impact of stock options in their financial statements since 1993, according to Business Journalism. Up to now, companies have only been required to report the number of options granted and their potential impact on their financials in a pro forma statement in a 10-K filing footnote. “As the requirement to expense becomes more of a reality… and they face that these costs have to go into the income statement, companies should make sure all corners are tucked in nicely,” said Robert Howell, a visiting professor at Dartmouth College’s Tuck School of Business, speaking to the Seattle Post-Intelligencer. Companies, especially tech firms, have fought this change in their accounting for years. The House of Representatives passed a bill titled the Stock Option Accounting Reform Act last year, 312-111, to block options expensing, but the legislation has stalled in the Senate. Business Journalism reports that a recent PricewaterhouseCoopers study found that only 79 percent of the 131 multinational companies participating in the survey granted options. This number has not grown as all of these companies offered options in 2003. Seventy-two percent of surveyed companies offered stock-purchase plans in 2002 and now only 51 percent offer these plans. In preparation for the expensing requirement, companies have either reduced the number of options available or converted existing options to restricted stock. Companies have also sped up their vesting schedules. Business Journalism reports that a study by Bear Stearns found that 102 companies with a median capitalization of $626 million had implemented accelerated vesting. Tech companies accounted for 36 percent of the accelerating companies. |
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