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How do the provisions of SFAS No. 123(R) differ from the bill introduced by members of Congress (Dreier and Eshoo), which would require expensing for options issued to only the top five officers in a company? Which approach do you think would result in more useful information? (Focus on comparability.)
LT wk2 CA16.4.doc

CA16­4 (Stock Compensation Plans) The following two items appeared on the Internet
concerning the passage of SFAS No. 123(R).
WASHINGTON, D.C.February 17, 2005 Congressman David Dreier (RCA), Chairman of the House

Rules Committee, and Congresswoman Anna Eshoo (DCA) reintroduced legislation today that
will pre­ serve broad­based employee stock option plans and give investors critical information
they need to understand how employee stock options impact the value of their shares.
Last year, the U.S. House of Representatives overwhelmingly voted for legislation that would
have ensured the continued ability of innovative companies to offer stock options to rank­and­file
employ­ ees, Dreier stated. Both the Financial Accounting Standards Board (FASB) and the
Securities and Exchange Commission (SEC) continue to ignore our calls to address legitimate
concerns about the im­ pact of FASBs new standard on workers ability to have an ownership
stake in the New Economy, and its failure to address the real need of shareholders: accurate and
meaningful information about a com­ panys use of stock options.
In December 2004, FASB issued a stock option expensing standard that will render a huge
blow to the 21st century economy, Dreier said. Their action and the SECs apparent lack of
concern for protecting shareholders, requires us to once again take a firm stand on the side of
investors and eco­ nomic growth. Giving investors the ability to understand how stock options
impact the value of their shares is critical. And equally important is preserving the ability of
companies to use this innovative tool to attract talented employees.
Here
We Go Again! by Jack Ciesielski
(2/21/2005,

http://ww
w.accountingobserve
r.com/blog/2005/02/he we­go­again) On February 17,
re­
Congressman David Dreier (RCA), and Congresswoman Anna Eshoo (DCA), officially entered
Silicon Valleys bid to gum up the launch of honest reporting of stock op­ tion compensation:
They co­sponsored a bill to preserve broad­based employee stock option plans and give investors
critical information they need to understand how employee stock options impact the value of
their shares. You know what critical information they mean: stuff like the stock com­
pensation for the top five officers in a company, with a rigged value set as close to zero as
possible. Investors crave this kind of information. Other ways the good Congresspersons want
to help in­ vestors: The bill also requires the SEC to study the effectiveness of those
disclosures over three years, during which time, no new accounting standard related to the
treatment of stock options could be rec­ ognized. Finally, the bill requires the Secretary of
Commerce to conduct a study and report to Con­ gress on the impact of broad­based employee
stock option plans on expanding employee corporate ownership, skilled worker recruitment and
retention, research and innovation, economic growth, and international competitiveness.
Its the old four corners basketball strategy: stall, stall, stall. In the meantime, hope for
regime change at your opponent, the FASB.

Instructions:

How do the provisions of SFAS No. 123(R) differ from the bill introduced by members of Congress (Dreier and Eshoo), which
would require expensing for options issued to only the top five officers in a company? Which approach do you think would
result in more useful information? (Focus on comparability.)

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LT wk2 CA16[1].4.doc

CA16­4 (Stock Compensation Plans) The following two items appeared on the Internet
concerning the passage of SFAS No. 123(R).
WASHINGTON, D.C.February 17, 2005...

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