SEC Commissioner Questions Options Rules

Securities and Exchange Commissioner Paul Atkins on Thursday questioned whether U.S. accounting rule makers should require expensing of stock options, saying it could create more problems than it solved.

Atkins, the first SEC member to align himself openly with critics of mandatory expensing, said he was not trying to tell the Financial Accounting Standards Board what to do and was expressing only his own opinion, not that of the entire SEC.

But at a conference on stock options expensing, he said he feared the FASB was moving toward requiring options expensing for political reasons, not accounting ones.

“I’m not sure that the presented fix doesn’t create more problems than it actually solves,” Atkins said.

The FASB is expected to issue a proposed rule soon to force companies to expense stock options, or count them as a routine cost like wages on their income statements.

Companies presently don’t have to expense options, but do have to disclose the cost of options in a footnote to their financial statements.

Stock options are contracts to buy or sell shares of stock for a set price at a future date.

The FASB still is searching for an acceptable method to value options. The method most often used, Black-Scholes, has been criticized as overstating costs.

During recent corporate scandals, many critics blamed stock options for inflating corporate earnings by tempting executives to pump up stock prices by any means.