Dreier, Eshoo Send Comment Letter to
Financial Accounting Standards Board
Bipartisan Group of 40 Members Express Concern About Stock Option Expensing

February 3, 2003

WASHINGTON - Congressman David Dreier (R-San Dimas), Chairman of the House Rules Committee, and Congresswoman Anna Eshoo (D-Palo Alto) sent a comment letter to the Financial Accounting Standards Board (FASB) today opposing any effort to mandate the expensing of stock options and instead encouraging, at the appropriate time, the adoption of investor-friendly disclosures of employee stock options. They were joined by a bipartisan group of 38 Members of Congress. The letter was sent in response to FASB's recent invitation for comment on the issue of stock option expensing.

In the letter, the Members express concern that the expensing of stock options would lead to an inaccurate picture of a company's financial health due to the acknowledged difficulty, if not impossibility, of accurately valuing stock options that have yet to exercised. They also note that such a requirement would have an enormous negative impact on the technology industry which has used stock options to attract the best and brightest rank-and-file workers. While the Members argue against mandating expensing, they do encourage the use of accounting principles that would give investors timely and accurate information, and they do agree that if and when disclosure methods are needed, FASB is the appropriate body for considering and deciding on those methods.

"Accounting principles that foster transparency, truthful and accurate financial reporting, and meaningful disclosures are critically important to help investors make informed investment decisions, and to foster efficient and growing capital markets," the letter states. "We support accounting principles that serve the public interest in this way, and we do not think a mandatory expensing standard meets this test."

The letter continues, "At a time when our government is searching for new ways to stimulate the economy, we need a clear vision about the importance of broad-based stock option plans to the nation's entrepreneurial soul and the workers and investors who are a part of it. We should adopt policies that encourage and expand the availability of broad-based stock option plans, not destroy them."