House Panel Votes to Limit Options Expensing

A congressional committee Tuesday voted to curtail a move by America’s independent accounting standards-setter to require that companies count stock options as business expenses.

The House Financial Services Committee approved on a bipartisan vote of 45 to 13 a bill that would limit any expensing standard from the Financial Accounting Standards Board to options granted to a company’s top five officers.

The bill also would delay implementing any standard for a year, until completion of a federal economic impact study.

The vote is a victory for Silicon Valley, which has argued that requiring expensing of broad-based option programs would unfairly slash the reported earnings of technology companies in particular.

But the bill faces an uncertain future. Some key members of the Senate have said Congress shouldn’t meddle with the work of the independent FASB.

In the House the measure has more than 100 sponsors in both parties; the chief sponsor, Rep. Richard H. Baker (R-La.), hopes for a House floor vote by August.

In the face of fierce opposition from the tech sector, the FASB recently proposed that all options should be expensed. The board is expected to issue a final rule by the end of this year.

Baker said his bill was aimed at protecting broad-based stock option plans that start-up companies often use to attract workers. These plans might simply dry up if they had to be expensed, he said.

Baker argued that requiring the expensing of options issued to a company’s top five officers would adequately address concerns about the abuse of option grants by company bigwigs.

But opponents said Congress should not be getting into the business of setting accounting standards, just two years after voting to increase the FASB’s independence in the Sarbanes-Oxley Act that cracked down on corporate corruption.

By approving the Baker bill, “we set the precedent of our overruling the FASB. I think that is a mistake,” said Rep. Barney Frank (D-Mass.).