UK - UK pension funds are backing US accounting reforms which would force firms to disclose the cost of share-based payments to employees.
A letter – signed by, among others, the National Association of Pension Funds, the Universities Superannuation Scheme, Railways Pensions Management and Shell Pensions Management Services – states the US will be out of line with other markets unless the changes are adopted.
The letter – which has also been signed by eight UK fund managers – says there is “no rational reason not to treat options as an expense like other forms of compensation such as salaries, cash bonuses, restricted stock and benefits”.
The changes, which have been proposed by the US Financial Accounting Standards Board, calls for the share payments to be included as expenses in financial statements.
In the US, these payments, including share options, are commonly included in the pay packages of all employees. But UK investors claim that expensing of stock options is essential if financial statements are to present an accurate picture of a company’s financial condition.
The letter blames fraudulent and misleading statements for the billions of dollars lost by foreign investors through recent US corporate scandals.It urges the FASB to “remain steadfast” in championing the “controversial yet much needed reform”.
The letter states: “If the proposals are not adopted, the US will be out of line with standards and practices being adopted in other markets, and we urge FASB to act in the best interest of international capital markets, global investors and the public interest.”
The big four accounting firms all support expensing, with shareholder resolutions asking companies to expense options already receiving majority support at Intel, IBM, Hewlett-Packard and Adobe Systems.
UK-listed companies will have to recognise share-based payments as an expense from the beginning of next year following a requirement issued by the Accounting Standards Board.
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