Accounting Blogging
Mild-mannered SayUncle is actually a CPA by day. However, this stuff bores even me. Hence, accounting blogging is rare.
It is good to see the bill requiring stock options to be expensed getting blocked:
The House voted Tuesday to block a rule that would require companies to count stock options against their profits, after a party-splitting debate over corporate accountability, economic growth and jobs.
The vote was 312-111 for a bill overriding a proposal by the rule-setting board for accounting. The board wanted to force publicly traded companies to record as an expense all forms of share-based payments to employees, including stock options.
(snip)
The rule change proposed in March by the Financial Accounting Standards Board could dramatically reduce the reported earnings of many big companies, particularly in the high-tech industry where stock options have been popular.
Equity is always equity. Such a change would have a dramatic impact on profits for companies and would artificially decrease earnings. The result on the markets would probably be bad as collectively companies would be doing worse on paper. This is up for consideration due to corporate abuses (*cough* Enron *cough*).
It is not surprising to me that the Big Four accounting firms support it. After all, it gives them more work to do.
July 20th, 2004 at 3:53 pm
Wow, another nubers guy! I am a mild mannered Financial Analyst by day.
July 20th, 2004 at 5:53 pm
Can you expand on why this is a good thing for us non-CPA’s?
July 20th, 2004 at 7:00 pm
Without getting into the accounting, it just means that if this passed stock options would be expensed (net income = revenue – expense; as such, net income is lower which is bad for the stock market)
The current method is that the company just moves it from one equity account to another. It costs no cash (typically) as the company is just issuing shares of stock it has held that weren’t on the market.
July 20th, 2004 at 9:12 pm
The current method is that the company just moves it from one equity account to another. It costs no cash (typically) as the company is just issuing shares of stock it has held that weren’t on the market.
Warren Buffet responded to this by saying, o.k. in that case any company should be happy to give him a million options on its shares since they don’t cost the company anything (well other than dilution of course).
I would have thought that you would have opposed the actions of the House since its interfering where it shouldn’t be..regardless of your personal opinion on the decision of FASB.
July 20th, 2004 at 9:35 pm
Well, the house did nothing, which is what i wanted.
July 21st, 2004 at 1:45 am
Well, the house did nothing, which is what i wanted.
According to the excerpt of the article you’ve got in this story, the House over-ruled the decision of the FASB. I think that counts for doing something unless I’m missing something.
July 21st, 2004 at 7:55 am
I interpreted the passage to mean it blocked a rule require the expensing of options (i.e., nothing changed)
July 21st, 2004 at 10:15 am
The House prevented a rule that the FASB wanted to implement regardless of your own feelings about the rule. What if the FASB had wanted to implement a rule that you liked and Congress stepped in and said that it couldn’t? The House over-ruled the decision of an independent body.
July 21st, 2004 at 10:40 am
It may be inconsistent that, while I oppose the house interfering generally, i find blocking a bad rule to be a good thing.
Consistency is a good thing for house paint, in humans it’s almost useless 🙂
July 21st, 2004 at 5:09 pm
Uncle:
Consistency is a good thing for house paint, in humans it’s almost useless.
Only as it pertains to you. As it pertains to say, John Kerry, for example, lack of consistency is a horrific character flaw. 🙂
July 21st, 2004 at 5:41 pm
Have i ever criticized kerry for changing his mind or flip-flopping?
I don’t think so.