Reprieve for US Earnings

Stephen Harris

15 April 2005

According to reports in the US media, SEC commissioners may grant US companies a six month reprieve over stock option expensing rules proposed by the Financial Accounting Standards Board (FASB). Under the new rules, public companies will be obliged to record stock options granted to employees as an expense from their first reporting period after June 15. This is expected to significantly reduce the reported earnings of many US firms, particularly in the technology sector. According to the Wall Street Journal, following complaints from the US business community over the timing of the measure, which coincides with the introduction of increasingly stringent corporate governance measures, the SEC is considering delaying the implementation of the new regime and for the rule to be effective for fiscal years, not quarters, beginning after June 15. This would effectively give most US firms an additional six months to comply.