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Three leading U.S. business groups urged accounting watchdogs Wednesday to reconsider their plan requiring companies to book the cost of employee stock options. The U.S. Chamber of Commerce, National Association of Manufacturers and Business Roundtable called on the Financial Accounting Standards Board to delay finalizing its proposed rule until the group has field-tested all the methods available to value options. “Investors deserve to know whether this new accounting standard will value employee stock options accurately or inaccurately,” the Chamber wrote in a letter to FASB. The organization, which represents more than 3 million businesses and organizations, added that it “strongly opposed” the proposed standard. The Washington-based Business Roundtable said it would be prudent for FASB to delay the proposed implementation date, January 2005, until testing of the valuation models can be the performed and the results “validated, audited and shared widely with the business and investor community.” NAM, the nation’s largest industrial trade association, representing 14,000 members, raised similar concerns over the valuation of options. FASB member Michael Crooch said the board does not plan to test systems for valuing options. He said the board conducted 17 field tests before issuing the draft standard on expensing options and consulted companies about issues they will face in accounting for options. “Companies have been calculating a number and putting that number in the footnotes for nine years — we call it the supreme field-test,” Crooch said. FASB’s proposed rule would require companies to expense stock options as they do other forms of pay. The proposal is particularly contentious among technology companies, which widely use options as compensation and which fear a major hit on earnings if they must expense them. Meanwhile, several shareholder groups are imploring lawmakers to vote on legislation that would preserve employee stock option plans. The Stock Option Accounting Reform Act, cleared the House Financial Services Committee on June 15, but has yet to be scheduled for a full vote in the House. “Congress is hurting shareholders by delaying this vote,” said Daniel Clifton, executive director of the American Shareholders Association. Added Grover Norquist, president of Americans for Tax Reform: “Taxpayers, shareholders and small businesses stand united against the FASB’s move to mandatory expensing. We’ve made our voices heard. Now Congress needs to act on this legislation and preserve the right of employees to share in the wealth of the corporations they are helping to build.” The bill, crafted by Rep. Richard Baker, R-La., would dilute FASB’s proposal by requiring companies to account for options only for their top five executives, pending a joint economic impact study by the Securities and Exchange Commission and Commerce and Labor departments. The Baker bill is expected to pass in the House, but it faces significant opposition in the Senate. Copyright �2004 TDD, LLC. All rights reserved.

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