FASB, Congress battle over stock options accounting.

• Position: National

The Financial Accounting Standards Board (FASB) has issued a proposed rule to require employers to expense employee stock options. Some in Congress oppose the move and have introduced legislation to delay implementation of the rule and limit its scope.

The FASB rule is similar to one issued by the International Accounting Standards Board and would require employee stock options to be shown as an expense on companies' financial statements. Large executive compensation packages and inflated earnings reports have been blamed, in part, on the lack of regulations on stock options. While approximately 100 companies of the Standard & Poor's 500 voluntarily report stock options, index earnings would likely have been 10 percent lower last year if options had been reported. Nasdaq earnings may have been down more than 40 percent.

FASB attempted to enact a similar rule in 1993, but strong opposition in Congress forced the Board to withdrawal the proposal--a move that some, including former Securities and Exchange Commission (SEC) Chairman Arthur Levitt, now regret. Efforts to block the proposal have surfaced again, but this time the issue of congressional involvement is at the core of the...