Jan. 30, 2003 – San Jose, CA – The Semiconductor Industry Association (SIA) has submitted comments to the Financial Accounting Standards Board (FASB) calling for the continued ability of US companies to grant stock options to rank and file workers.
FASB is considering whether to propose any changes to the US accounting standards on stock-based compensation.
“Providing the investing public with transparent, accurate, and easily comparable information is of paramount importance, and any changes to the rules should bolster this goal,” said SIA President George Scalise. “Accountants in academia, the private and public sector don’t agree on the question of how to value stock options. Introducing a wildly fluctuating number that has nothing to do with the underlying performance of the company into financial statements would not benefit the investing public,” said Scalise.
SIA members believe that current accounting rules rightly require detailed disclosure on option grants, including their potential dilutive effects. Market share prices directly reflect diluted earnings/share; therefore the cost of stock options is already reflected in the market price of stock. Information on the impact on earnings/share and dilution caused by option grants should be made available in a consistent manner to shareholders, SIA said. If options were included both as an expense and in dilution, they would essentially be counted twice.
“Valuation is a problem that has stumped the experts for years. We understand that the FASB may create a ‘valuations advisory group’ to address this question ? that sounds like a wise place to start this process,” noted Scalise, adding, “Ultimately, any new rules must be based on a uniformly accepted valuation methodology or they run the risk of making financial statements less transparent, rather than more transparent.
“In our industry, stock options are routinely given not only to executives, but also to rank and file workers ? in fact 80 to 95% of options are granted by our members to those below the senior executive level, which allows us to insure that our employees are able to fully share in the success they have helped make possible,” said Scalise.
FASB is soliciting comments until February 1 on the differences between US accounting standards on stock-based compensation and proposed international rules.