FASB Acts Against Technology Industry -- California Capitol Hill Bulletin -- Volume 10, Bulletin 6 -- March 13, 2003

The Financial Accounting Standards Board (FASB) dealt a blow to the technology industry on Wednesday, March 12, when it voted 7-0 to address whether to require companies to report stock options as expenses on their profit and loss statements. In doing so, the Board appeared to accept the argument that options should be expensed, and focused on how to place a price on the options. FASB indicated that it hoped to complete its review of the issue by the end of this year and implement any new rules in 2004.

Stock options given to an employee allow him or her to purchase the company's stock at a set price for a set period of time. The technology industry argues that if it is required to show the options as an expense on its books, it will severely reduce the profitability of many companies, especially new start-ups. In addition, they argue that it will reduce a company's ability to hire and retain qualified employees during the riskier start-up years.

Members of the California congressional delegation have fought the issue of expensing stock options over the years. Sen. Barbara Boxer has been actively involved in the issue from the Senate, and Reps. David Dreier (San Dimas) and Anna Eshoo (Atherton) have spearheaded several letters on the House side.

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