Options Fray Goes to Washington

Congress is breathlessly moving on to the next financial area it knows little about: accounting.

The government is preparing to once again enter the decades-old fray over how companies should account for the stock options they grant to employees. In the 1990s, corporate America -- led largely by the technology industry -- successfully persuaded the Financial Accounting Standards Board (FASB) to back down from its effort to force companies to expense the cost of those option grants. Such a move would lower reported corporate profits. Technology companies have long championed the use of options as a cheap way of recruiting talent, and they were loath to recognize the dilutive effect of issuing them.

But FASB, the independent standards-setter of the accounting profession, is back with renewed vigor in its determination to require that companies expense the cost of stock option grants. And Congress is left squabbling over whether to muscle into an area it largely has no jurisdiction over. ...