Stock options legislation reintroduced in US House

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21 Feb 2005

The political battle in Washington over accounting for stock options has been reopened.

On 17 February 2005, 23 members of the US House of Representatives introduced legislation that would impose a three-year moratorium on the SEC's enforcement of FASB Statement 123. FAS 123 was revised in December 2004 to require all companies to account for all share-based payments, including stock options, at fair value – similarly to IFRS 2. During the three years, the SEC would be required to study the impact that expensing options may have on the US economy and on 'small entrepreneurial businesses'. The bill would require listed companies that offer stock options to disclose "plain-English descriptions of share value dilution, expanded and more prominent disclosure of stock option-related information, and a summary of stock options granted to the five most highly compensated officers". The bill would not prohibit voluntary expensing of stock options by SEC registrants. The Senate must also pass the same legislation before the bill becomes law. The new proposal, known as HR 913, is similar to a bill (HR 3574) that was approved by the House in July 2004 by a vote of 312 to 111, with 10 nonvoting. The US Senate did not enact an equivalent of HR 3574, so it did not become law. HR 913 has been referred to the House Committee on Financial Services.

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