Expensing stock options: a recipe for more corporate disaster?FASB's proposed regulation forcing companies to treat stock options as a business expense promises to thwart companies from overstating reported net income by attempting to measure the immeasurable. This will not provide shareholders better disclosure or solve the string of recent corporate failures. FASB's flawed regulation measures income and expense items in a hypothetical manner with no basis in cash and transactions affecting the enterprise. Fair and accurate accounting should be based on the actual measurement of an expenditure or receipt that is determined in cash. One could argue that the cost of a stock option is reflected in the dilution that occurs to existing stockholders before the options are exercised, assuming the stock price goes up. The dilution is a mathematical calculation measured and shown on the income statement already. The actual cost will never be measurable in a cash expense to the company. The proposed regulation will have a chilling effect  This article or section may deal primarily with the U.S. and may not present a worldwide view. on employee
initiative, retention and morale because stock options become too
expensive to grant. Why dampen the engine of growth that has propelled
this country to technical and innovative leadership? Why disenfranchise dis·en·fran·chise tr.v. dis·en·fran·chised, dis·en·fran·chis·ing, dis·en·fran·chis·es To disfranchise. dis thousand's of employees that would otherwise have no ability to achieve ownership in their companies? FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). will argue that the rule setting procedure should not be politicized. But that is what FASB is doing--playing politics. The accounting authorities are trying to negate justifiable criticism concerning their role in corporate collapses caused by abusive accounting procedures. If the true goal is to eliminate executive abuses of stock options, then limit the number of options that can be granted to executive officers. Don't discourage ownership to rank and file employees. PICKING THEIR SPOTS 32% of fraud perpetrators had been working for their companies for 10 to 25 years. KPMG KPMG Klynveld Peat Marwick Goerdeler (accounting firm) KPMG Kaiser Permanente Medical Group KPMG Keiner Prüft Mehr Genau (German) KPMG Kommen Prüfen Meckern Gehen DONALD MURRAY Sir Donald Bruce Murray (born January 24, 1923) was a Lord Justice of Appeal of the Supreme Court of Northern Ireland. Born in Belfast, he was educated at Belfast Royal Academy and the Queen's University, Belfast as well as Trinity College Dublin. President, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Resources Connection, Costa Mesa Costa Mesa (kŏs`tə mā`sə), city (1990 pop. 96,357), Orange co., S Calif., on the Pacific south of Santa Ana; inc. 1953. It is a transportation, residential, and light industrial center. A forum for your comments, suggestions and reactions. Fire off your succinct missive to: editor@calcpa.org. |
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