Stock Option Accounting Reform Act

Bill: 108-hr-3574
Sponsor: Rep. Baker, Richard H. [R-LA-6]
Introduced: 2003-11-21 in the House
Policy area: Taxation
Subjects: Accounting
Commerce
Corporation reports
Corporation taxes
Economic growth
Economic impact statements
Employee ownership
Employee stock options
Executive compensation
Finance and Financial Sector
Financial statements
Foreign Trade and International Finance
Government Operations and Politics
Government paperwork
Governmental investigations
Income tax
Industrial research
Information disclosure (Securities law)
International competitiveness
Labor and Employment
New products
Profit
Recruiting of employees
Skilled labor
Small business
Standards
Stock repurchasing
Stocks
Tax deductions
Valuation

Summary:
action_date: 2003-11-21
text: 
Stock Option Accounting Reform Act - Amends the Securities Exchange Act of 1934 to require an issuer of registered securities to show as an expense in its mandatory annual report the fair value of all stock purchase options granted to certain of its senior executive officers after December 31, 2004.
 
Exempts small business issuers from such requirement.
 
Amends the Securities Act of 1933 to require reporting of: (1) stock option expenses as a reduction of the total expense in the fiscal year in which they expire or are forfeited; and (2) as income any excess by which such reduction exceeds total option expenses for any fiscal year.
 
Requires any accounting principle recognized as "generally accepted" by the Securities and Exchange Commission (SEC) regarding the expensing of stock purchase options to comply with this Act. Denies recognition to any such accounting principle until the Secretaries of Commerce and of Labor complete a joint study on the economic impact of mandatory expensing of all employee stock options.
 

 

action_date: 2004-07-15
text: 
Stock Option Accounting Reform Act - (Sec. 2) Amends the Securities Exchange Act of 1934 to require an issuer of registered securities to show as an expense in its annual report the fair value of all stock purchase options granted after December 31, 2004, to: (1) all individuals serving as the chief executive officer of an issuer, or acting in a similar capacity, during the most recent fiscal year, regardless of compensation level; and (2) the four most highly compensated executive officers (other than a chief executive officer) that were serving as executive officers of an issuer at the end of the most recent fiscal year (&quot;named executive officer&quot;).
 
Defines the fair value of an option to purchase such stock 
 
Exempts small business issuers from the Act's requirement.
 
(Sec. 3) Amends the Securities Act of 1933 to prohibit the Securities and Exchange Commission (SEC) from recognizing as &quot;generally accepted&quot; any accounting principle relating to the expensing of stock options unless it complies with both: (1) specified expense recomputation requirements; and (2) a required joint study by the Secretaries of Commerce and of Labor of the economic impact of the mandatory expensing of employee stock options.
 
Requires the recomputation and re-reporting of the expense of a stock purchase option that is exercised, to equal the difference between the price of the underlying stock and the exercise price. Requires the re-reporting as a reduction of the total expense originally required to be reported if the option expires or is forfeited.
 
(Sec. 4) Directs the SEC to require each issuer to include in its periodic report more detailed information regarding stock option plans, stock purchase plans, and other arrangements involving an employee acquisition of an equity interest in the company, including: (1) a discussion, written in accordance with the Plain English Handbook published by the SEC Office of Investor Education and Assistance on the dilutive effect of stock option plans; (2) expanded disclosure of the dilutive effect of employee stock options on the issuer's earnings per share; (3) prominent placement and increased comparability and uniformity of all stock option related information; (4) the number of outstanding stock options; (5) the weighted average exercise price of all outstanding stock options; and (6) the estimated number of stock options outstanding that will vest in each year.

action_date: 2004-07-20
text: 

(This measure has not been amended since it was reported to the House on July 15, 2004. The summary of that version is repeated here.)

 
Stock Option Accounting Reform Act - (Sec. 2) Amends the Securities Exchange Act of 1934 to require an issuer of registered securities to show as an expense in its annual report the fair value of all stock purchase options granted after December 31, 2004, to: (1) all individuals serving as the chief executive officer of an issuer, or acting in a similar capacity, during the most recent fiscal year, regardless of compensation level; and (2) the four most highly compensated executive officers (other than a chief executive officer) that were serving as executive officers of an issuer at the end of the most recent fiscal year (&quot;named executive officer&quot;).
 
Defines the fair value of an option to purchase such stock.
 
Exempts small business issuers from the Act's requirement.
 
(Sec. 3) Amends the Securities Act of 1933 to prohibit the Securities and Exchange Commission (SEC) from recognizing as &quot;generally accepted&quot; any accounting principle relating to the expensing of stock options unless it complies with both: (1) specified expense recomputation requirements; and (2) a required joint study by the Secretaries of Commerce and of Labor of the economic impact of the mandatory expensing of employee stock options.
 
Requires the recomputation and re-reporting of the expense of a stock purchase option that is exercised, to equal the difference between the price of the underlying stock and the exercise price.
 
 Requires the re-reporting as a reduction of the total expense originally required to be reported if the option expires or is forfeited.
 
(Sec. 4) Directs the SEC to require each issuer to include in its periodic report more detailed information regarding stock option plans, stock purchase plans, and other arrangements involving an employee acquisition of an equity interest in the company, including: (1) a discussion, written in accordance with the Plain English Handbook published by the SEC Office of Investor Education and Assistance on the dilutive effect of stock option plans; (2) expanded disclosure of the dilutive effect of employee stock options on the issuer's earnings per share; (3) prominent placement and increased comparability and uniformity of all stock option related information; (4) the number of outstanding stock options; (5) the weighted average exercise price of all outstanding stock options; and (6) the estimated number of stock options outstanding that will vest in each year.


Legislative actions:
action_date: 2004-09-07
text: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
action_date: 2004-07-21
text: Received in the Senate.
action_date: 2004-07-20
text: The Clerk was authorized to correct section numbers, punctuation, and cross references, and to make other necessary technical and conforming corrections in the engrossment of H.R. 3574.
action_date: 2004-07-20
text: Motion to reconsider laid on the table Agreed to without objection.
action_date: 2004-07-20
text: On passage Passed by the Yeas and Nays: 312 - 111 (Roll no. 397).
action_date: 2004-07-20
text: Passed/agreed to in House: On passage Passed by the Yeas and Nays: 312 - 111 (Roll no. 397).
action_date: 2004-07-20
text: The House adopted the amendment in the nature of a substitute as agreed to by the Committee of the Whole House on the state of the Union.
action_date: 2004-07-20
text: The previous question was ordered pursuant to the rule.
action_date: 2004-07-20
text: The House rose from the Committee of the Whole House on the state of the Union to report H.R. 3574.
action_date: 2004-07-20
text: POSTPONED PROCEEDINGS - At the conclusion of debate on the Kanjorski amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the noes had prevailed. Mr. Kanjorski demanded a recorded vote and made a point of no quorum. The Chair postponed further proceedings on the question of adoption of the amendment until later in the legislative day and the point of no quorum was considered as withdrawn.
action_date: 2004-07-20
text: DEBATE - Pursuant to House Resolution 725, the Committee of the Whole proceeded with twenty minutes of debate on the Kanjorski amendment in the nature of a substitute.
action_date: 2004-07-20
text: POSTPONED PROCEEDINGS - At the conclusion of debate on the Maloney amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the noes had prevailed. Mrs. Maloney demanded a recorded vote and the Chair postponed further proceedings on the question of adoption of the amendment until later in the legislative day.
action_date: 2004-07-20
text: DEBATE - Pursuant to House Resolution 725, the Committee of the Whole proceeded with ten minutes of debate on the Maloney amendment.
action_date: 2004-07-20
text: POSTPONED PROCEEDINGS - At the conclusion of debate on the Sherman amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the noes had prevailed. Mr. Sherman demanded a recorded vote and the Chair postponed further proceedings on the question of adoption of the amendment until later in the legislative day.
action_date: 2004-07-20
text: DEBATE - Pursuant to House Resoultion 725, the Committee of the Whole proceeded with ten minutes of debate on the Sherman amendment.
action_date: 2004-07-20
text: DEBATE - Pursuant to House Resolution 725, the Committee of the Whole proceeded with ten minutes of debate on the Oxley amendment.
action_date: 2004-07-20
text: GENERAL DEBATE - The Committee of the Whole proceeded with one hour of general debate on H.R. 3574.
action_date: 2004-07-20
text: The Speaker designated the Honorable Tom Latham to act as Chairman of the Committee.
action_date: 2004-07-20
text: House resolved itself into the Committee of the Whole House on the state of the Union pursuant to H. Res. 725 and Rule XVIII.
action_date: 2004-07-20
text: Rule provides for consideration of H.R. 3574 with 1 hour of general debate. Previous question shall be considered as ordered without intervening motions except motion to recommit with or without instructions. Measure will be considered read. Specified amendments are in order.
action_date: 2004-07-20
text: Considered under the provisions of rule H. Res. 725. (consideration:  CR H6001-6022; text of measure as reported in House:  CR H6011-6012)
action_date: 2004-07-20
text: Rule H. Res. 725 passed House.
action_date: 2004-07-19
text: Rules Committee Resolution H. Res. 725 Reported to House. Rule provides for consideration of H.R. 3574 with 1 hour of general debate. Previous question shall be considered as ordered without intervening motions except motion to recommit with or without instructions. Measure will be considered read. Specified amendments are in order.
action_date: 2004-07-16
text: Placed on the Union Calendar, Calendar No. 367.
action_date: 2004-07-16
text: Committee on Energy and Commerce discharged.
action_date: 2004-07-16
text: Committee on Energy and Commerce discharged.
action_date: 2004-07-15
text: Referred sequentially to the House Committee on Energy and Commerce for a period ending not later than July 16, 2004 for consideration of such provisions of the bill and amendment as fall within the jurisdiction of that committee pursuant to clause 1(f), rule X.
action_date: 2004-07-15
text: Reported (Amended) by the Committee on Financial Services. H. Rept. 108-609, Part I.
action_date: 2004-07-15
text: Reported (Amended) by the Committee on Financial Services. H. Rept. 108-609, Part I.
action_date: 2004-06-25
text: Mr. Boehlert asked unanimous consent that the Committee on Financial Services have until midnight on July 2 to file a report on H.R. 3574. Agreed to without objection.
action_date: 2004-06-15
text: Ordered to be Reported (Amended) by the Yeas and Nays: 45 - 13.
action_date: 2004-06-15
text: Committee Consideration and Mark-up Session Held.
action_date: 2004-06-03
text: Committee Consideration and Mark-up Session Held.
action_date: 2004-05-12
text: Forwarded by Subcommittee to Full Committee (Amended) by Voice Vote.
action_date: 2004-05-12
text: Subcommittee Consideration and Mark-up Session Held.
action_date: 2004-03-03
text: Subcommittee Hearings Held.
action_date: 2003-12-02
text: Referred to the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.
action_date: 2003-11-21
text: Referred to the House Committee on Financial Services.
action_date: 2003-11-21
text: Introduced in House
action_date: 2003-11-21
text: Introduced in House