The independent Accounting Standards Oversight Council today announced that as a result of its meeting yesterday in Toronto, it would recommend to the Accounting Standards Board that it re-examine the current accounting standard that does not in all cases require Canadian companies to expense the cost of stock options in their financial statements. The Council decided that Canadian accounting standard-setters should not wait for their American counterparts to act before addressing this issue in Canada.

“Our aim is to ensure that investors have reliable, clear information from the financial statements, on which they can base their decisions,” said Thomas Allen, AcSOC chairman. “To that end, I think that the recommendation we have decided on today is based on our sense that there is a trend in the capital markets and among many stakeholder groups that expensing stock options is the right thing to do. Our recommendation is that the Accounting Standards Board examine this issue closely, and determine whether there is a need for a change to be made to the current standard.”

The AcSB will incorporate the AcSOC recommendation into the agenda for its meeting in November, when it will discuss what action to take on this issue. The AcSB is solely responsible for developing and setting accounting standards in Canada. AcSOC, an independent body reporting to the public, brings a broad perspective to complex issues facing standard-setters, and supports the AcSB with advice and recommendations in setting accounting standards in Canada.

At its meeting, AcSOC considered written submissions and heard presentations on either side of the issue. “The Council heard the views of a number of knowledgeable persons for and against recognition of the expense associated with stock options,” said Allen. “Clearly, there are strong points of view on either side and I wish to thank all concerned for their participation.”

AcSOC heard that the impact of such a change would be more significant for some companies and industries than others. However, other submissions and presentations made it clear that Canadian issuers would benefit generally in lower cost of capital from Canada having a high quality accounting standard in this area. On balance, AcSOC did not believe that the competitive issues should preclude the AcSB reconsidering the current optional treatment.