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Congress is unlikely to pass legislation this year that would block a proposed accounting standard directing companies to expense employee stock options. A bill introduced by Sen. Michael Enzi would limit the scope of the rule, which was developed by the Financial Accounting Standards Board. But Coy Knoebel, a spokesman for the Wyoming Republican, said the measure, called “The Stock Option Reform Act,” is off the table for now. “With the Senate focusing on appropriations, intelligence reform and a few other issues this week, it is unlikely that any non-germane issue, including stock options, will be brought up in a lame duck session,” Knoebel said. Lawmakers are close to completing a host of government spending bills and are wary of attaching amendments that could derail passage of the legislation, said one Capitol Hill source. Knoebel also said that, while FASB has delayed implementing the proposal until June 15, Enzi hopes that the Securities and Exchange Commission will require the board to conduct further field testing of models to value options. FASB’s standard would require companies to reflect the value of all employee stock options in their earnings report, rather than allowing the current practice of disclosing such costs in footnotes to their financial statements. Proponents say such a change would clarify corporate accounting, while critics contend it would discourage companies from offering options to employees. Enzi’s bill would bar the SEC from recognizing any options expensing standard until the SEC completes a study on its economic impact. It also would require companies to expense the stock options of only their five highest-paid executives and exempt rank-and-file employee plans. The House overwhelmingly passed a similar bill in July. Enzi’s bill has 26 co-sponsors from both sides of the aisle. But Senate Banking Chairman, Richard Shelby, R- Ala., opposes it and has vowed to thwart any such measure. Shelby, who also sits on the Appropriations Committee, previously said he would fight efforts to attach the bill to spending legislation. A coalition of retirement plan sponsors, consumer groups, accounting professionals and other supporters of FASB’s also are urging Senate Majority Leader Bill Frist, R- Tenn., to block attempts to attach Enzi’s legislation to a spending bill. In a Nov. 11 letter, the group, which calls itself the Financial Accounting Coalition for Truthful Standards, or FACTS, said Congress should not “usurp” FASB’s authority. FACTS also sent a letter to SEC chief accountant Donald Nicholaison asking him not to further delay the accounting standard. The group claims that additional field-testing of valuation models is “simply another effort to derail the implementation of FASB’s standard.” Still, one congressional source said the Enzi bill could succeed next year because several newly-elected Republicans support it. In fact, incoming Minority Leader Harry Reid of Nevada is a co-sponsor. “Those are significant developments in terms of what could happen next year,” said a lobbyist associated with the International Employee Stock Options Coalition, a Washington-based trade association that supports Enzi’s bill. FASB expects to have the final standard ready some time in December. Copyright �2004 TDD, LLC. All rights reserved.

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