FASB Votes to Expense Stock Options

The Financial Accounting Standards Board voted April 22, 2003 to require companies to treat their employee stock options as “expenses” on their income statements. Apparently, this move by FASB is only an initial decision that will be followed by a more formal proposal later this year. Under curent rules, companies can either choose to disclose the theoretical value in footnotes or treat the value of options as a compensation expense in their income statements. After Enron, many companies have already voluntarily agreed to expense options on their income statements. The problem seems to be how to value the options and critics of this decision by the Board say that this change in accounting treatment will make financial statements less reliable because of the difficulty in coming up with an identifiable value for the options.