Senate resolution on stock options.

The Senate passed resolutions urging the Financial Accounting Standards Board to abandon its controversial project on accounting for employee stock option compensation. The resolution, an amendment to the Fair Credit Reporting Bill, passed by an overwhelming 88-9 vote. A similar bill in the House of Representatives is waiting in the wings.

Significantly, the Senate simultaneously passed another resolution clearly stating that FASB's independence should be safeguarded and that Congress should not impair its objectivity or decisionmaking process.

"I think the resolution supporting our integrity and objectives is by far the more significant of the two," said Dennis R. Beresford, chairman of the FASB.

FASB's proposed statement, which was criticized harshly by companies and public accounting firms alike, requires companies to report stock option compensation as an expense. Companies fear the requirement will virtually eliminate options, which are considered an especially useful form of compensation by start-up companies. The critics' main complaint is the difficulty of measuring the value of such options. FASB still is searching for a fair, accurate and acceptable means of measurement.

Among the supporters of the FASB project is the Association for Investment Management Research (AIMR). "We do not believe it is appropriate for the Congress or any other government body to get involved in setting accounting standards," said Raymond DeAngelo, CPA, vice-president of the AIQAR. "Standard setting always has been a private-sector activity and should continue to be."

There still are bills in the Senate and the House that direct the Securities and Exchange Commission not to accept the accounting standards the FASB is trying to establish.