One of the factors that are giving companies an impetus to make the change is that, within the next month, the IASB is likely to issue a proposed standard that would require the expensing of stock option compensation. While the standard would not necessarily apply to U.S. companies at present, much of the rest of the world, including those of the European Community, would meet the international standard. That standard, however, uses a different methodology from the one that is recommended by FASB.
Some companies are converting in order to improve their image in the wake of corporate accounting scandals. The high-tech sector, which has been most resistant to the expensing of stock option compensation on income statements, led the charge in the mid-1990s that led to FASB backing down from a proposed requirement that options expensed in the same way as other compensation. The same sector is now resisting the IASB project.
That sector is also expected to be highly critical of the FASB proposal and is already saying that the three alternative methods for conversion will result in incomparable financial statements. A representative of the high-tech industry said that rather than clarify and facilitate the transition, the proposal only makes the picture cloudier.
According to FASB project manager, Patrick G. Durbin, the board recognises that financial statements will show differences as companies choose among the three alternatives or to not convert at all. The board is amending the disclosure provisions of Statement 123 so that every company, regardless of their decision, will have comparable information disclosed. FASB has been keeping track of how many companies have already stated that they will be expensing employee stock options. Among the more than 80 companies are Allstate, Boeing, Pendant, Coca-Cola, Dow Chemical, General Motors, Marathon Oil, Merrill Lynch, MetLife and Wal-Mart.
The Board is expected to issue an Exposure Draft asking whether American business agrees with the IASB proposal. If the U.S. ever decides to accept international standards, companies may have to expense stock option compensation in a manner similar to the one that FASB proposed prior to adopting Statement 123.
(Source : http://www.electronicaccountant.com/AccountingToday/ and http://www.fasb.org/)