House OKs Widespread Options Expensing Postponement

July 20, 2004 ( - Lawmakers threw down the gauntlet Tuesday in their continuing battle with accounting rulemakers over pending stock options expensing proposals, with the US House approving a bill that would ban such marketwide requirements for now.

The House measure, co-authored by US Representative Anna Eshoo, (D-California), requires the immediate expensing of options granted to the top five executives of a company, but exempts small companies from the obligation, according to news reports. Small firms can’t be required to expense options for the three years following an initial public offering.

The bill prohibits Securities and Exchange Commission recognition of any further stock option expensing requirements and that any expensing requirement be put off until the Commerce and Labor Departments further study the issue. Finally, the legislation would also enact new disclosure rules for companies which offer stock options, requiring them to disclose additional information regarding share value dilution and other stock option-related information.

“Today’s overwhelming vote (312-111) in support of our legislation sends a strong message to rank and file employees across the country that Congress will protect option plans for them,” Eshoo said in a written statement. “Without immediate action by Congress, FASB’s ill-advised mandatory expensing rule (See FASB Chief: Expensing Proposal a Needed Change ) will go into effect without any examination of its impact on American workers, their employers, or the US economy, leaving the future of this important employee benefit in doubt.”

Also Tuesday, the International Employee Stock Options Coalition (IESOC) hailed the house vote, charging that the FASB proposal   would likely lead to the elimination of many broad-based employee stock option plans, with serious repercussions for millions of American workers, their companies and the US economy. The measure now goes onto the US Senate where similar legislation has been introduced by Senators Mike Enzi, (R-Wyoming), and Harry Reid (D-Nevada).