Companies Prepare FASB Fee Boycott

March 27, 2003 (PLANSPONSOR.com) - The Financial Accounting Standards Board (FASB) has cautioned that some corporations may be mounting a fee embargo counterattack to daunt the push to require stock options be treated as an expense on financial statements.

FASB Chairman Robert Herz said certain companies, who remained nameless, may be preparing for a battle royale opposing the recently imposed fee system intended to support FASB and a new national auditing oversight board.   “There are some companies who think (the fee) is an unfair tax and others who couldn’t care less about that, but who believe that may be a way to throw a monkey wrench into what we’re doing,” Herz said in a Reuters report.

The new funding is scheduled to come courtesy of a new system put into place by the implementation of the Sarbanes-Oxley Act.   Under the new system, corporations would be required to pay regular fees to support the national accounting standards-setter.   Previously, the Connecticut-based FASB relied heavily on voluntary contributions to fund its operations.

A similar fee system is expected to fund the Public Company Accounting Oversight Board, another Sarbanes-Oxley creation.

Boston Tea Party?

By boycotting the fee, the companies are hoping to steer the FASB away from the possible move toward mandatory stock option expensing, which has become a hot issue amid a wave of corporate scandals (See  FASB Speeds Up Option Disclosure Effective Date ) .

However, Herz did not seemed deterred by the possible embargo, expressing faith in FASB’s support for expensing.   “My expectation is that most of the board members feel fairly strongly that it is compensation and it should be expensed.”

Under current US guidelines, companies can choose to subtract the expense of stock options from their income statements or disclose their theoretical value in the footnotes of their financial statements.  With the exception of a handful of early volunteers and the approximately 130 recent coverts, most companies opt to record the expenses in their footnotes (see  Fewer Companies Volunteer Stock Option Expenses ).

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