Foes of Expensing Welcome FASB Delay

The decision by accounting regulators on Wednesday to postpone by six months a requirement that companies recognize options costs means that the fight over expensing won't end for at least eight more months. Many observers expect opponents of expensing to use the extra time to limit the rule's effects -- or derail the new accounting rule.

"I would be betting that [the expensing rule] does not see the light of day," said Robert Willens, a tax and accounting analyst with Lehman Brothers. "I think the opposition forces will prevail here."

Although opponents blocked a similar effort in the mid-1990s, few expected them to succeed this time. Even as recently as March, many observers believed that expensing was inevitable, and thought the struggle would be all but over by now.

That the issue is still in dispute -- and possibly in doubt -- has much to do with election-year politics and the perceived lack of political sensitivity by the accounting regulators, observers say. With the election so close, the parties are desperate for campaign money. And the technology industry provides a ready source of cash.

"Everyone's willing to do just about anything to get the money to spend," said Lynn Turner, the managing director of research at proxy advisory Glass Lewis and former chief accountant of the Securities and Exchange Commission.

But politicians are getting more than the tech industry's money. Many members of Congress and senators want to be seen as tech-friendly, said James Lucier, senior political analyst for Prudential Equity Group. The policymakers also tend to agree with the notion that companies should continue to have free reign to use options to compensate employees, Lucier said.

"The stock options guys have won the policy argument on the Hill," he said.

Under current accounting rules, companies can choose whether or not to recognize the cost of the options they grant their employees on their income statements. In reality, few of the most prolific granters of options -- typically companies in the technology and Internet industries -- expense them.