The following item appeared on the Internet concerning the requirement to expense share options. “Here We Go Again!” by Jack Ciesielski (2/21/2005, again On February 17, Congressman David Dreier (R–CA), and Congresswoman Anna Eshoo (D–CA), officially entered Silicon Valley’s bid to gum up the launch of honest reporting of share option compensation: They co-sponsored a bill to “preserve broad-based employee share option plans and give investors critical information they need to understand how employee share options impact the value of their shares.”
You know what “critical information” they mean: stuff like the share compensation for the top five officers in a company, with a rigged value set as close to zero as possible. Investors crave this kind of information. Other ways the good Congresspersons want to “help” investors: The bill “also requires the SEC to study the effectiveness of those disclosures over three years, during which time, no new accounting standard related to the treatment of share options could be recognized. Finally, the bill requires the Secretary of Commerce to conduct a study and report to Congress on the impact of broad-based employee share option plans on expanding employee corporate ownership, skilled worker recruitment and retention, research and innovation, economic growth, and international competitiveness.”
It’s the old “four corners” basketball strategy: stall, stall, stall. In the meantime, hope for regime change at your opponent, the FASB.

(a) What are the accounting requirements related to share-based compensation?
(b) How do the provisions of IFRS in this area differ from the bill introduced by members of the U.S. Congress (Dreier and Eshoo), which would require expensing for options issued to only the top five officers in a company? Which approach do you think would result in more useful information? (Focus on comparability.)
(c) The bill in the U.S. Congress urges a standard that preserves “the ability of companies to use this innovative tool to attract talented employees.” Write a response to these congress people explaining the importance of neutrality in financial accounting and reporting.

  • CreatedJune 17, 2013
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