SEC Is Expected to Delay Rules on Stock Option Expensing

The Securities and Exchange Commission is expected to give most U.S. companies a six-month reprieve from new rules requiring employees’ stock options to be counted against profits, a person familiar with the matter said Wednesday.

The new rules, set by the Financial Accounting Standards Board, call for publicly traded companies to record employee stock options as an expense beginning with their first fiscal reporting period after June 15. The mandate could dramatically reduce reported earnings of many big companies, especially in the technology industry.

But SEC staff members have recommended delaying when the rules take effect, the person said, confirming a report in the Wall Street Journal.

The recommendation is to make the rules effective for companies’ fiscal years, not quarters, starting after June 15.

Most companies have years beginning Jan. 1, giving them an additional six months to comply.

The SEC commissioners are expected to approve the delay, which is supported by SEC Chairman William H. Donaldson, the person said.

Since the federal accounting board proposed the stock option expensing rules in March 2004, many companies have complained that they impose an accounting burden at the same time that significant new corporate accountability rules are taking effect.

The expensing rules already have been delayed by six months once before, in October, at the request of the SEC.