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In a rare move, the Securities and Exchange Commission gave listed companies a six-month reprieve from a controversial new rule that requires companies to deduct the cost of employee stock options from profits. The rule was to take effect for the first fiscal quarter after June 15 for large companies and after Dec. 15 for small and foreign companies. The much-anticipated delay does not change the new accounting requirement, which the Financial Accounting Standards Board issued in December. It only amends the required compliance dates, the SEC said in a statement. The delay is intended to ease the regulatory burden on companies that are struggling in many cases to comply with the sweeping new auditing controls mandated by the Sarbanes-Oxley Act. “For those companies whose fiscal years start Jan. 1, this is a welcome and positive development and reflects the concern that all stakeholders in the financial reporting process have raised with the implementation date adopted by the FASB,” said Rick White, president of the International Employee Stock Options Coalition. There are still implementation and guidance matters to be resolved, said White, who hoped the SEC would continue to work “expeditiously” to answer the many remaining questions. “Resolution of these remaining issues is imperative, as broad-based employee stock options are a vital economic tool,” White said. FASB unveiled the rules after months of debate and opposition from technology companies, for which options are widespread forms of compensation. The SEC oversees the accounting board and has the power to change the rules or scrap them entirely. “The accounting required by Statement No. 123R represents a significant improvement to U.S. generally accepted accounting principles, and the implementation of that standard will improve transparency for investors,” said Donald T. Nicolaisen, the commission’s chief accountant. But he added that feedback from public companies, corporate executives and accountants about the burdens of new accounting rules made it clear that resources are already “stretched thin.” Copyright �2005 TDD, LLC. All rights reserved.

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