By Mike Gullette
ABA yesterday warned the Financial Accounting Standards Board that a proposed change in accounting for stock options will subject a company’s earnings to the volatility of its stock price. The change, one of several that is meant to reduce complexity in accounting, would require a company’s stock option “APIC pools” to be recorded in the income statement. Currently, such changes in the APIC pools are reflected mainly in equity.
ABA expressed support for other aspects of the proposal that will simplify the accounting. However, ABA also advised that the change to APIC pools would also likely cause many companies to make adjustments to their net income in their earnings announcements for the APIC pools, as such market value changes would not be under control of the company. ABA expects the proposal to be finalized by year end, though any effective date is unclear.