Ensign-Boxer Bill Would Stall Mandatory Option Expensing

April 30, 2003 (PLANSPONSOR.com) - Senators Barbara Boxer (D-California) and John Ensign (R-Nevada) have introduced legislation that would put off mandatory expensing of stock options for at least three years.

>Mandatory expensing would be “bad for workers, bad for the economy, and bad for investors,” Boxer said in a statement.   The California senator had announced her intention to introduce the bill last week after the Financial Accounting Standards Board (FASB) unanimously agreed that companies should be required to treat stock option grants as expenses (see  FASB Says Yes to Option Expensing ).   At the time Boxer had promised to introduce the Ensign-Boxer bill, which she said would, “send this whole matter to the SEC for review before the proposed rule goes into place and we are dealing with its unintended negative economic consequences.”

>Ensign said he wants to ensure rank-and-file employees aren’t closed out of stock ownership, while improving corporate financial information to shareholders and investors.   The Senate bill is similar to one offered in the House, which would defer new accounting rules on stock options pending study by the Commerce Department and the Securities and Exchange Commission (see  Congress Weighs in on Both Sides of Options Expensing ).

>Both the House and Senate bills:

  • call for a three-year moratorium on mandatory expensing
  • direct the SEC to call for improved disclosure on employee stock option plans
  • require the SEC to report to Congress after three years.

>In a slight variation, the Senate bill would impose an additional waiting period on the SEC after it makes its report, requiring it to hold off for 60 days before permitting any changes in accounting for stock options, according to Dow Jones.