FASB today issued a proposal that would require the expensing of stock option and related compensation in corporate financial statements, instead of the common practice of disclosing it in notes to corporate reports. The public may submit comments on the proposal through June 30.
The requirement, if approved by the Financial Accounting Standards Board, could reduce S&P 500 earnings by 20%, assuming no change in the issuance of options, estimated Robert Willens, managing director and tax and accounting analyst at Lehman Brothers. At Intel Corp. alone, the requirement could reduce earnings by some 40%, said Tom Wamberg, chairman and CEO of Clark Consulting.
Both believe the requirement, if adopted, would deter the use of stock option compensation. They noted that some companies, including Boeing Co., Coca-Cola Co. and Microsoft Corp., have already started to expense options.
