Levin Applauds Stock Option Accounting Reform

WASHINGTON: Sen. Carl Levin, D-Mich., who has been advocating stock option accounting reform since 1992, issued the following statement applauding today’s action by the International Accounting Standards Board to require companies to treat stock option compensation as an expense on their financial statements:

“Stock options are the 800 pound gorilla that has yet to be caged by corporate reform. Enron and other corporate scandals have exposed how flawed stock option accounting rules have fueled deceptive accounting, excessive executive pay, and nonpayment of taxes by profitable corporations.

“Today, international accounting experts have changed the rules and required companies that use international accounting standards to show stock option compensation as an expense on the company books beginning next year. FASB ought to do the same for companies using U.S. accounting standards. Honest accounting of stock options would strengthen the accuracy of U.S. financial statements and help restore investor confidence in our financial markets. Hundreds of leading U.S. companies like Coca-Cola, General Motors, General Electric, Dow Chemical, Home Depot, and Wal-Mart, have already begun expensing stock options without negative effect, and a FASB expensing requirement would level the playing field for these companies, so that honest stock option accounting does not put them at a competitive disadvantage.

“Action by FASB would align U.S. accounting standards with the new international standards, so that multinational companies have a consistent set of stock option accounting rules. FASB ought to act as quickly as possible to put an end to dishonest accounting of stock options.”