Business Groups Seek Delay in Options Rule

Three influential U.S. business groups Wednesday urged accounting rule makers to hold off on requiring all employee stock options to be expensed until an acceptable valuation model is found.

The U.S. Chamber of Commerce, National Assn. of Manufacturers and Business Roundtable said the Financial Accounting Standards Board should take time to “field test” various models for estimating options costs.

“Investors deserve to know whether this new accounting standard will value employee stock options accurately or inaccurately,” the groups said in a joint release.

The plea added to the pressure on the FASB, which is facing a torrent of protest for its proposal that companies’ stock-options costs be subtracted from income. Technology firms, in particular, have argued that expensing of options would slash their earnings, penalizing their stock values.

Proponents say options represent real costs to shareholders and should be treated as such.

The so-called Black-Scholes method often is used to value options, but it has some shortcomings because it was intended for exchange-traded “put” and “call” options, rather than for those issued to employees.

In its draft proposal in March, the FASB said that companies could choose other methods to value options as long as they could justify them properly.

That triggered concerns among some experts who said that without a fixed standard, companies could use a variety of methods and some would intentionally choose the one that minimized the cost of options.

Separately, in another challenge to the FASB, a bill that would limit any option-expensing rule could come to a vote on the U.S. House floor next week, Republican leaders said.