SEC to vote on deferring accounting rule

The Securities and Exchange Commission is set to vote on deferring the implementation of a controversial accounting rule that requires companies to treat stock options as an expense.
The prospect of a delay was welcomed by industry groups that say they need more time to implement the rule, which demands that companies recog- nise the cost of granting options to employees in their income statements.
The rule was to come into force for quarterly reporting periods beginning after June 15, but SEC staff are now proposing that it be introduced only for reporting years starting after that date, according to a person familiar with the issue.
The change would buy an extra six months for the large number of companies whose next business years begin on January 1 2006. William Donaldson, SEC chairman, and the regulator's four commissioners are due to vote on the proposal.
Silicon Valley companies, which have used options to incentivise staff, have led opposition to the expensing rule, which was written by the Financial Accounting Standards Board.
Mark Heesen, president of the National Venture Capital Association, said: "Anything that delays this is a net positive -hopefully in that period of delay month issued guidance on how companies should apply the rule.
Company finance departments are weighed down with the Sarbanes-Oxley Act, which requires them to test and document the effectiveness of internal controls against fraud.
An industry lobbyist who has opposed the stock option rule said: "Certainly for companies with a fiscal year beginning in January this is a welcome and positive development. With the SEC continuing to work on all the technical questions surrounding the implementation there remain a number of unanswered questions."
The NVCA said it was not clear what an extension for public companies would mean for private groups, which had already been given an extra six months -until December 15 - to comply with the new rules.
More mature technology companies have recently changed their stance on options expensing. Microsoft and EDS now both support the rule and last week IBM said it would begin to reflect stock options in its first quarter results.
Thousands of European companies are deducting the cost of stock options from profits for the first time this year as international accounting standards introduced across the European Union contain an equivalent requirement.
Stock options, however, have been used less widely in Europe than in the US.