EU Also Expected To Begin Expensing Stock Options

By John S. McClenahen Unless the European Parliament decides otherwise between now and the end of January 2005, about 8,000 European-listed manufacturers and other companies will shortly have to account for stock options and other share-based payments as expenses in their financial reports. Currently the cost of share-based payments to management and employees are listed in financial notes but not included in companies' income statements. The European Union's (EU) pending new rule parallels action in the U.S., where the Norwalk, Conn.-based Financial Accounting Standards Board (FASB) last week issued a rule requiring the expensing of share-based payments beginning in 2005. Large manufacturers and many other publicly traded companies must follow the new FASB standard beginning June 15, 2005; smaller companies will have to comply starting Dec. 15, 2005. An estimated 750 publicly traded firms in the U.S. already, voluntarily, expense share-based payments on their financials.

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