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FASB votes to draft stock compensation proposal.

Acting on one of its most contentious issues, the Financial Accounting Standards Board agreed in principle to require companies to deduct from corporate earnings the value of stock compensation--including stock options--awarded to executives.

The expense will be measured at the award's fair value at the grant date and will be recognized over the award's vesting period.

Beginning no earlier than calendar year 1994, the proposal calls for a three-year period during which the expense measure should be disclosed in footnotes. After the three-year period, the expense should be included in the determination of net income.

An exposure draft is expected to be issued for public comment sometime in June.

According to FASB Chairman Dennis R. Beresford, the current practice of accounting for stock options produces "inconsistent results--depending on the type of option granted--that impair the credibility of financial statements."

However, the FASB action is strongly opposed by the Business Roundtable, a group of chief executives of 200 major corporations. "The lobbying has just begun," said Jill Kanin-Lovers, senior vice-president for worldwide compensation and benefits at American Express Travel Related Services, who spoke at a recent Conference Board seminar in New York City.

At the same seminar, Ira T. Kay, managing director for executive compensation practice at the Hay Group, said the FASB will closely study comments describing the proposal's impact on "real-life" results. The board "has not shut the door to changing its mind," he observed.
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:Jun 1, 1993
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