The Financial Accounting Standards Board has ruled that public companies must begin expensing stock options beginning with their first fiscal reporting period after June 15, 2005. Private companies and those that file as small business issuers must comply after December 15, 2005. The Board chair stated that the new rules will provide more complete and unbiased information. Stock options have been offered as perks, or incentives, to employees. Currently, a company?s cost of issuing options may be simply footnoted in its financial statement and not deducted from the income it reports to investors. Under the new rules, companies must subtract the option expense from earnings.
See "Companies told to start expensing options", Michael P. Regan, The Boston Globe, December 16, 2004