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Expensing: Going Beyond The Minimum Requirements

This is Part Two of a two-part series written by Miller and Bahnson. Part One appeared in the last edition of Compliance Week, on May 11.

Our previous column explained how FASB's proposed new standard on option expensing is outmoded and incomplete (see box at right).

The main problem is that it reports only the grant date value as expense over the vesting period. The same expense is reported whether the options' value goes up (way up) or down (way down). If their real value goes up and the options are exercised, the issuer will reap a huge tax savings, but FASB won't allow it to appear on the income statement. And, if the...

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