Comment Period Opens On Stock-Options Proposal

By John S. McClenahen Manufacturing executives and other interested parties have until June 30 to comment on the Financial Accounting Standards Board's (FASB) proposed rule changes for booking stock options and other share-based payments. Under FASB's proposal, released March 31, all forms of share-payments to employees would be treated like other forms of compensation by recognizing their cost in the company's income statement. The expense would generally be the fair value of the shares on the date they were granted, FASB says.. Current accounting practices require only that the cost of fixed-plan employee stock options be disclosed in the footnotes to a company's financial statements. The FASB proposal was immediately praised by Sen. John McCain, R-Ariz., and Sen. Carl Levin, D-Mich., with Levin noting, "About 500 companies, including Coca-Cola, General Motors, General Electric, Dow Chemical, Amazon, EDS, Home Depot and Wal-Mart now expense stock options without suffering the dire consequences predicted by opponents." There is, however, considerable opposition to the expensing of stock options. And the International Employee Stock Options Coalition, a group of trade associations, on March 31 criticized the FASB proposal, claiming it would "significantly distort companies' financial statements, making it impossible for investors to compare the financial picture of companies and penalizing rank-and-file workers." The proposal is available on FASB's Website, www.fasb.org.

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