The long-running war over stock options expensing may finally be drawing to a close.

The

Securities and Exchange Commission

on Thursday announced that it was pushing back the date on which many companies will have to

start recognizing the cost of options in their income statements. But the SEC pointedly affirmed that companies will have to start expensing, leading some analysts, as well as the practice's opponents, to believe expensing is all but inevitable.

The delay by the SEC may "give fuel" to opponents' fight, but "Congress is likely not going to move in the end," says James Lucier, Washington analyst at Prudential Equity Group. "In the wake of various corporate scandals, it's very hard for members of Congress to take that position" to override expensing, he added.

Indeed, representatives of the technology industry, which has some of the most prolific users of options -- including

Siebel Systems

(SEBL)

,

Mercury Interactive

(MERQ)

,

Adobe

(ADBE) - Get Report

,

Broadcom

(BRCM)

,

Cisco

(CSCO) - Get Report

and

Nvidia

(NVDA) - Get Report

-- and the most vocal opponents of expensing, are beginning to accept that, regardless of the delay, companies will soon have to recognize options costs.

Technology companies would prefer that the accounting rule that mandates expensing never took effect, said Rick White, CEO of TechNet, an industry lobbying group. That said, by delaying the effective date of the rule and by recently issuing guidelines that give companies flexibility in implementing it, the SEC has addressed at least some of the industry's concerns, White says.

Whether the industry will continue to lobby Congress to bar expensing or delay it further is "a little bit up in the air right now," says White. But, he added, "We're encouraged by the direction the SEC has taken. We're working with them ... We're hopeful that a month from now, we'll get something that both sides can live with."

Some expensing opponents in the tech industry are even more direct about recognizing the fight is all but over.

Getting Real

"We'd obviously prefer not to have expensing, but we're realistic. We're two months away from this going into effect" for some companies, said one technology company representative, who asked not to be named. "When you deal with the probability of congressional action and something coming out

to stop the rule before then, you have to be realistic about it."

To be sure, not everyone's convinced that the fight is over. One high-tech lobbyist outside of TechNet, who asked not to be named, said his group is still committed to lobbying Congress to block expensing.

"Nobody's made a deal with me," the lobbyist said. "Our member companies are going to be pretty upset if we don't do anything."

Indeed, rather than scale back its lobbying efforts in response to the delay, the tech industry will likely be emboldened by it, said Robert Willens, a tax and accounting analyst for Lehman Brothers. Accounting regulators have now delayed the rule twice and have shown flexibility in how it is interpreted, Willens noted.

The regulators "are already caving in to some extent," he said. "This will embolden the tech industry to pursue this even further."

And the delay could end up working in opponents' favor, Willens said. Contestants have argued that companies will react to expensing by cutting back on their options grants, which could hurt their ability to attract talented workers, and in turn, their competitiveness. That argument may find more favor in Congress if economic conditions worsen during the delay period or if the U.S. trade deficit continues to balloon, says Willens.

"The longer this thing drags on, the greater the chances of getting this thing overturned," he says.

Shareholder activists have pushed since at least the early 1990s to require companies to recognize the cost of stock options on their income statements. In the mid-1990s, accounting regulators tried to require expensing, but backed off after Congress threatened to block their efforts.

The issue returned to the forefront earlier this decade after the accounting scandals at

Enron

,

WorldCom

and other companies. Many corporate critics attributed those fiascos in part to the abuse of options at those companies.

Current accounting rules allow companies to choose whether or not to include options expenses on their income statements or to estimate them in their financial footnotes. Most companies that issued options chose to keep those costs out of their reported earnings.

Because they didn't have to show how much options were costing them, many firms issued excessive amounts of options, particularly to corporate executives, say corporate critics. And because options reward short-term stock movements, those executives often made short-sighted or even illegal moves to boost stock prices, critics say.

The new accounting rule, issued last December, will require all companies to include options expenses in their income statements. (One byproduct has been a rush among some companies to

accelerate the vesting of existing options.)

Originally, the Financial Accounting Standards Board proposed that the rule take effect in December 2004, but last October, the group delayed the effective date of the

options expensing rule so companies with market capitalizations or revenue greater than $25 million to delay expensing options until the first quarter of their first fiscal year that begins after June 15. Smaller companies won't have to start recognizing options costs until the beginning of their first fiscal years after Dec. 15.

The SEC granted the delay to give companies that have been struggling to comply with the

requirements of the Sarbanes-Oxley Act more time to implement the expensing rule, agency representatives said. Plus, the SEC was worried that the earlier effective date would have required many companies to start expensing in the middle of their fiscal years, leading to potentially confusing financial statements.

The delay disappointed expensing advocates, including board members of the FASB, who noted that the move marked possibly the first time the SEC had overridden an effective date of a new rule set by the accounting board. The SEC never formally asked the FASB to weigh in on whether a delay was necessary, said Edward Trott, a FASB board member.

"I respect that the SEC might have information that we don't have, that they believe

a delay would be best," Trott said. But he added, "I believe

options expensing improves financial reporting. I would like to see it in place as soon as possible."

Still, several expensing advocates believe that even with the delay, the fight is over.

"Companies that are smart are already expensing options, including some of the largest most complex companies," says Nell Minow, editor and founder of the

Corporate Library

. "It's inevitable,

opponents might as well get used to the idea."

"The market wants this," she added. "That's more important than anything that

accounting regulators say."