Senate Banking Committee Agrees on Accounting Reforms; Stock Options Expensing Appears Dead

The Senate Banking Committee, by a 17-4 vote, has agreed on a compromise version of broad reforms of the accounting profession. The agreement focuses on setting boundaries on accounting firms providing consulting services and on establishing standards for the oversight of accounting procedures. Notably dropped from the compromise was a proposal that was part of a bill introduced by Banking Committee chair Paul Sarbanes, D-MD (the "Public Company Accounting Reform and Investor Protection Act") that would direct the SEC to study the impact of accounting rules on stock options. Advocates for stock options feared the proposal would build momentum for requirements that companies expense stock options on their income statement. Evan Bayh, D-IN, led the effort to drop the accounting proposal. It would seem very likely that if Senate Democrats cannot agree even to study the idea, broader proposals, such as the Levin-McCain bill (the "Ending Double Standards for Stock Options Act") to prohibit companies from taking tax deductions for options they have not expenses, have virtually no chance of passage any time soon, if at all.