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The FASB wants stock options to appear in the footnotes quarterly rather than yearly. At first, this would appear to be a small step in the right direction. However, the FASB has voted no to expensing stock options and states that companies choosing to expense stock options will be able to choose from one of three transition methods.
FASB Statement: Companies can account for stock options using 3 different methods, some companies will expense options while others will not, and we will spend the next few years tweaking Statement 123 until we widdle away the unfavorable methodologies (or the 2 transition methods that companies bend the least).
Rather than pick the methodology that punishes corporate earnings the most, and allow companies to complain within their footnotes, the FASB has once again opened up the doors of complication. To be sure, the worst possible outcome going into this month FASB’s meetings (for the investor not corporate America) was that the FASB would not take a stand. Not only has the FASB not taken a stand, they have actually backtracked after 7-years of effort.
As for the FASB’s argument that stock options should not be singled out as an expense and that all the data is available in the footnotes anyways – this doesn’t wash. Most stock option plans are ongoing (not your typical ‘one-time’ footnote entry), and a complete set of footnotes are not fully disclosed until weeks after companies report headline earnings results.
Quite frankly, the evidence continues to mount that the FASB is looking out for corporate America’s interests.
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