Feeds

CA to record stock options as expenses

Accounting method we can understand

  • alert
  • submit to reddit

High performance access to file storage

ComputerWire: IT Industry Intelligence

Computer Associates International Inc has announced that it plans to record the cost of new stock options as expenses, as it continues its efforts to improve the image of its financial accounting and corporate governance.

The Islandia, New York-based systems management vendor has been heavily criticized for its accounting methods in the last year, and its accounts are under investigation by both the Securities and Exchange Commission and the US Attorney General's Office. Those investigations are believed to focus on accounting that led to over $1bn in stock options being granted to three of its key executives in 1998.

The company has repeatedly denied that its accounting practices are suspect, but has taken steps to improve its corporate governance with the appointment of more outside board members and the adoption of new corporate governance principles. These moves, along with a $10m payment, were enough to deflect the threat of a fresh proxy battle with Ranger Governance Ltd for control of the CA board, and the company is now taking further steps to tidy up its accounting.

Specifically, CA is adopting the fair value-based method of recording stock options contained in the Statement of Financial Accounting Standards (SFAS) 123, Accounting for Stock-Based Compensation. Starting with the company's next financial year, which begins April 1, 2003, CA will expense all future employee stock-option grants over the vesting period at a fair value based on the date the options are granted. The adoption of this new accounting method is expected to decrease CA's earnings by $0.02 per share in the first year.

CA is the latest in a line of many big US companies that have decided to expense stock options. Although the practice decreases earnings, it is also proving popular with investors after the recent accounting scandals at Enron Corp and WorldCom Inc. In the last month Coca-Cola Co, Neuberger Berman Inc, Cinergy Corp and Amazon.com Inc have also announced that they will begin to expense for stock options.

One company that has avoided changing its stock option accounting despite pressure from both investors and politicians is Microsoft Corp. If Microsoft had expensed stock options in its most recent quarter, it is estimated that it would have reported net income of $903m rather than $1.52bn.

© ComputerWire

High performance access to file storage

More from The Register

next story
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
It may be ILLEGAL to run Heartbleed health checks – IT lawyer
Do the right thing, earn up to 10 years in clink
prev story

Whitepapers

Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
SANS - Survey on application security programs
In this whitepaper learn about the state of application security programs and practices of 488 surveyed respondents, and discover how mature and effective these programs are.