Feeds

Tech lobby loses stock options battle

WYSIWYG comes to the balance sheet

  • alert
  • submit to reddit

Build a business case: developing custom apps

US corporations must accurately reflect the value of stock options in their accounts from June next year, the accounting industry's board FASB ruled today.

The practice had drawn criticism from many sides, including Joseph Stiglitz, Alan Greenspan, Greenspan's predecessor at the Federal Reserve Paul Volker, John McCain and Warren Buffet. But the change,which was narrowly rejected more than a decade ago, was opposed by much of the tech industry which favored renumerating staff in equity, rather than higher salaries.

However, any sense of unity crumbled in July when Microsoft said it would expense stock options. The move may break tech CEO addiction to options, which critics have suggested leads to bubble valuations.

Corporations such as Intel had resisted the move even when their shareholders voted for it. Astonishingly, Intel judges the value of its stock options to be zero. Apple management, having campaigned against expensing options, now includes the figures in its accounts after its shareholders voted to overturn the practice. IBM and HP successfully fought off similar shareholder campaigns, albeit narrowly.

Small businesses are exempt from the requirement, FASB Statement No.123. FASB board member Michael Crooch said that full disclosure "improves the relevance, reliability, and comparability of that financial information and helps users of financial information to understand better the economic transactions affecting an enterprise and supports resource allocation decisions."

Republican Senator Pete Fitzgerald (Il.) who has spent a decade campaigning for the move, called expensing options as "an egregious accounting practice that contributed to the worst corporate accounting scandals in our nation's history.

"In the aftermath of Enron, WorldCom, Global Crossing, Tyco, Adelphia and other corporate scandals, Congress should be trying to ensure that corporate earnings reports are more, not less, reliable."

FASB would have passed the measure in 1993, but tech lobby sock puppet Senator Joe Lieberman threatened to strip it of its unique role as the private sector's accounting rulemaker.

PwC estimates that the practice distorts tech companies' accounts by $9bn, or less than $300 per company. If this is accurate, it shows that the move will hurt only a few, very large companies.

The move had been opposed by the Cato Institute, which consistently takes the admirable position that individual investors are responsible for the consequences of their own investment decisions. Fine. So why confuse them with the facts? ®

Related stories

As stock sank, Fatcat SBC boss paid himself $19.5 million
CA to record stock options as expenses
ARM plans to charge options against profits

7 Elements of Radically Simple OS Migration

More from The Register

next story
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Nintend-OH NO! Sorry, Mario – your profits are in another castle
Red-hatted mascot, red-colored logo, red-stained finance books
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
prev story

Whitepapers

7 Elements of Radically Simple OS Migration
Avoid the typical headaches of OS migration during your next project by learning about 7 elements of radically simple OS migration.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Solving today's distributed Big Data backup challenges
Enable IT efficiency and allow a firm to access and reuse corporate information for competitive advantage, ultimately changing business outcomes.
A new approach to endpoint data protection
What is the best way to ensure comprehensive visibility, management, and control of information on both company-owned and employee-owned devices?