FASTEN SEAT BELTS: Bumpy Ride For Stock Option Accounting.

• Author: Hinchman, Grace
• Position: Brief Article

We are about to embark on another round of potent political opposition against the seemingly mundane process of accounting standards. Stock options accounting is about to be revisited by the new International Accounting Standards Board (IASB), the body created to establish global accounting rules,

The IASB is without a full appreciation of the 1994 political firestorm that resulted in the United States when the Financial Accounting Standards Board proposed its Exposure Draft 127-C, "Accounting for StockBased Compensation." Beginning in late 1993 and through '94, the FASB was under siege from protests over this Exposure Draft, which resulted in more opposition than any other change the board has made since it was founded in 1973.

The political and business opposition was swift, concentrated and complete. Grassroots letter writing campaigns were organized by a hi-technology business coalition that included International Business Machines Corp., Apple Computer Inc., McDonald's Corp., the National Venture Capital Association, the American Electronics Association (AEA) and several smaller technology firms. Congressional oversight hearings were conducted, during which FEI expressed its serious concerns. Legislation introduced by Sen. Joseph Lieberman, D-Conn., S. 1175, the "Equity Expansion Act," proposed an alternative approach to stock options that would have made options exempt from the FASB proposal. There was a similar bill introduced in the House of Representatives.

Eager to be responsive to their constituents, several members of the House and the Senate supported a "Sense of Congress Resolution" introduced by Rep. Anna Eshoo, D-Calif. and former Sen. Bill Bradley, D-N. J. Although such a measure lacks statutory authority, it did express congressional concern about the FASB Exposure Draft. The Senate Resolution was never voted on because the FASB backed down from its proposal, but there were more than 60 votes in the Senate to support the Resolution.

The opposition to the FASB went to such lengths, including organizing a good old-fashioned labor union rally. During the FASB public hearings in San Jose, Calif., more than 4,000 hi-tech employees rallied at a nearby conference center to oppose the stock options proposal and signed petitions intended for their Congressional delegations. Led by a marching band, the employees were addressed by...