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  • Government Affairs >> Stock Options >> Expensing Issues




    July 26

     

    SUPPORT S. 2760, PRESERVE STOCK OPTIONS FOR RANK-AND-FILE

    Senators Enzi, Lieberman, and others, have filed a bill, S. 2760, the "Stock Options Fairness and Accountability Act," which would direct the SEC to study all of the issues involved with stock options and make recommendations. Following are reasons to support this bill.

    The Enzi-Lieberman bill prevents a rush to judgment that would kill stock options. The "Stock Options Fairness and Accountability Act" (S. 2760) filed by Senators Enzi, Lieberman, Allen, Boxer, Burns. Frist, Feinstein and Ensign, would direct the SEC to conduct a thorough study not only of the accounting issues, but also other public policy issues in the stock options debate, such as whether the valuation models work, the impact expensing will have on the availability of options to both rank-and-file workers and senior executive and whether investors would be better served by having enhanced disclosures of the details of a firm’s stock options plans. The SEC has the authority, expertise and credibility to conduct such an expanded study. The Enzi-Lieberman bill provides a more reasonable and appropriate vehicle for resolution of the stock option accounting debate.

    Vote "No" on amendments offered by Senators McCain and Levin.

    Senators Levin and McCain have indicated that they intend to offer stock options amendments to any and every available legislative vehicle. Senator McCain’s proposed amendment would require that companies treat stock options as an expense for financial reporting purposes. Senator Levin’s proposed amendment would require that the Financial Accounting Standards Board (FASB) study the issue and enact an appropriate standard within 12-months. These proposals will end stock options for rank-and-file workers and preserve them for senior executives.

    • Senator McCain’s amendment would directly legislate an accounting standard. Congress should not get involved in the business of setting accounting standards. Fed Chairman Alan Greenspan told the Senate Banking Committee that Congress should do nothing on stock options. There is broad disagreement over whether expensing of stock options is appropriate. Many experts believe that expensing stock options would only mislead investors and give them an inaccurate picture of a firm’s financial position. Just because options might be a form of compensation does not mean that they ought to be expensed like other forms of compensation.
    • Senator Levin’s Amendment would direct the FASB to study the appropriateness of expensing stock options only from an accounting standpoint. There is more to the stock options accounting debate than just the technical accounting theory. Before any final decision is made on expensing stock options, there should be a study of issues that is more thorough than Senator Levin proposes; nor should FASB be compelled to study issues outside its competence. Congress recently enacted legislation purporting to make FASB independent. It would be ironic indeed for the next bill to tell FASB what to do and when to do it.

     

    This page was last updated on 07/29/02.  
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