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FASB agrees to propose expensing stock options

  • FASB (old) Image

30 Oct 2003

At its meeting yesterday, the US Financial Accounting Standards Board agreed to expose, for public comment, a standard that would require companies to expense the fair value of stock options granted to employees.

The proposal would likely be issued in February 2004 and, if adopted, would take effect in 2005. The IASB published a similar proposal last year (Exposure Draft ED 2) and is expected to issue a final standard during the first quarter of 2004, also effective in 2005. Currently, companies in the United States are permitted, but not required, to recognise stock options as part of employee compensation cost. Several hundred listed companies (out of about 15,000) recognise the expense. Even if they elect not to charge the cost to expense, companies must disclose the fair values of options granted. Current IFRS require neither expensing nor disclosure of the fair values of share-based compensation. Both the FASB and IASB proposals would apply to all companies, not just publicly traded ones.

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