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The
International Accounting Standards Board (IASB) has proposed a
global accounting standard that would require the expensing of
employee stock options on income statements. The US Financial
Accounting Standards Board (FASB) is considering reversing US
policy--in effect since 1994-to require expensing in the name of
harmonization of US and International accounting standards.
 Financial
impact could be measured in billions of dollars.
If adopted,
Cisco will evaluate affordability of rank-and-file broad based
options programs
Likely result:
far reduced broad based options program.
Removes major
retention and recruitment tool.
Major change
in company culture - loss of employee ownership.
Options should
not be expensed: it is bad accounting
The potential
dilution of each investor's share of company ownership is the real
cost of employee stock options. (EPS is already considers the impact
of employee stock options.)
Accurate,
consistent and useful information about employee stock options must
be disclosed on a quarterly basis
Shareholders
should have approval over stock options plans, as they do at
Cisco
Broad-based stock option plans give employees at all
levels a chance to own a "piece of the rock" and increase
productivity for the company.
Options
programs keep companies competitive in recruiting and retention -
especially needed in time of global competition for engineering
talent.
As other countries are graduating many more engineers and
math and science PhDs than the US - which lead to innovative new
technologies and research - stock options must remain a key tool for
recruitment and retention for US companies.
Employee stock
options fuel innovation and the entrepreneurial spirit.
Expensing options could lead to elimination or curtailment
of broad-based options plans.
Currently
there is no accurate, reliable and consistent way to value options -
the current valuation method (Black-Scholes) is for options that can
be freely traded, whereas employee stock options are often
restricted - subject to vesting over years.
top
International
Employees Stock Options Coalition (IESOC)
Financial Accounting
Standards Board (FASB)
International
Accounting Standards Board (IASB)
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