Companies with a year end of June 30 are required
with the quarter starting July 1, 2005 to comply with the
new Federal Accounting Standards Board stock option
expensing rule FAS123 (See
SEC Makes it Official: FASB 123
Implementation Date Moved Back Again
Stock option expensing will reduce a company's
The Web report from AccountingWeb.com gave an example of
the difference expensing makes in the earnings-per-share
figure for Microsoft Corp. - $1.42 without expensing
and $1.30 with expensing.
Analysts told the Wall Street Journal that managers
of mutual funds, pension plans, and other institutional
investors who oppose stock option expensing say they want
the higher numbers.
They worry that lower earnings forecasts will reduce
the value of stocks they own.
Bear Stearns Cos. and UBS Securities are trying to
limit confusion by requiring analysts to consider the cost
of options, the report said.
Thomson Financial, PLC's Reuters Estimates and Zacks
Investment Research are producing consensus earnings
estimates determined by how a majority of analysts
calculate corporate earnings, meaning the cost of options
expensing is not included in their calculations.
Stock option grants are decreasing, though.
According to a survey by Deloitte, 75% of
respondents are reducing or have already reduced the number
of options granted (See
Options Cut in Response to FAS123