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Legislation introduced to overturn FASB stock option proposal.

Legislation to repeal controversial rules proposed by the Financial Accounting Standards Board that would impose a new accounting charge on stock options was introduced by Senator Joseph Lieberman (D-Conn.).

S 1175, the Equity Expansion Act of 1993, will, if signed into law, overrule any decision to implement FASB'S Accounting for Stock-Based Compensation exposure draft. The ED requires companies to recognize an expense for all stock-based compensation awards (see "FASB Issues Proposal on Stock Option Compensation," JofA, Sep.93, page 23).

"As a matter of abstract accounting theory, FASB'S approach to stock option accounting may be defensible," Lieberman said, "but from a public-policy, job-creation and competitiveness perspective, it simply is unnecessary and unusually disruptive."

Joining Lieberman as cosponsors of the bipartisan bill, which also provides tax incentives for employees to retain stock purchased through options, were Senators Connie Mack (R-Fla.), Diane Feinstein D-Calif.) and Barbara Boxer (D-Calif.). A companion measure, HR 2759, was introduced in the House by Nancy Johnson (R-Conn.) and Lewis Payne (D-Va.).

Supporters of the FASB proposal also are active. Senator Carl Levin D-Mich.) and Representative John Bryant (D-Tex.) sent a "dear colleague" letter to lawmakers urging support for the proposed rule change. "All forms of executive pay other than stock options already are recognized as corporate expenses," Levin and Bryant said. It is time to bring stock options under the rules of ordinary compensation."

Corporate concerns. The FASB proposal, as expected, has been widely criticized by accountants in industry and commerce. "Like most accountants, I think the FASB'S efforts are a waste of time," said Thomas M. Foster, vice-president and controller of Phoenix-based Phelps-dodge Corp.

"There are much greater accounting problems FASB could spend its time on. It shouldn't try to develop noncash charges that essentially don't provide financial statement users with any useful information," he told the Journal.

But," Foster added, "I would hate to see generally accepted accounting standards established by Congress. So while I support the goal of the bill, I'm against passage because it sets a bad precedent."

Levitt's apprehension. During his Senate confirmation hearings (see "Arthur Levitt Becomes New SEC Chairman," above), new Securities and Exchange Commission Chairman Arthur Levitt, Jr., commented on the escalating controversy.

"You may be certain the commission will oversee the FASB process and carefully consider all the views and comments on the exposure draft in determining whether to accept the standard," Levitt told members of the Senate Banking, Housing and Urban Affairs Committee.

On the other hand, Levitt emphasized he was very apprehensive about the notion of legislating accounting standards," which, he said, "are best set through the process we have today."
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Publication:Journal of Accountancy
Date:Oct 1, 1993
Words:435
Previous Article:The future of practice-monitoring programs.
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