Over

Have written about the faded history of the century-plus close relationship between the United States and Canada in relation to the establishment of financial accounting standards. Largely all over, as of 2006, with the move in Canada towards International Financial Reporting Standards.

Came across a 2002 article by Oliver Bertin, “Council wants stock options expensed”, Globe and Mail, September 26, 2002, p. B3.

Advisory councils assisting, then and now, in confusing legislative and executive roles.

And it seemed to show…

Stock options will show up as an expense affecting a company’s bottom line, if a body that oversees financial statements had its way.

Moreover, the Accounting Standards Oversight Council wants to go ahead with new rules without waiting for the United States to take the lead.

“One view is that Canada and the United States should stock in lock-step,” said Senator Michael Kirby, vice-chairman of the council. “Our view is that making the change is more important than waiting for the United States.”

…the council merely recommended its position to the Accounting Standards Board, the body that sets accounting standards in Canada…

…Council chairman Thomas Allen said “…Our sense is that there is a trend in the capital markets and among many stakeholder groups that expensing stock options is the right thing to do.”

The council is a voluntary independent advisory group, but it carries considerable weight in accounting circles because it includes some of the most respected and powerful financial experts in Canada. Among them are Mr. Kirby….Barbara Stymiest, president of the Toronto Stock Exchange and Denis Desautels, a former federal auditor-general.

The proposal is scheduled to go before the standards board at its regular monthly meeting in November…

Ron Salole, director of accounting standards for the board, said it does not necessarily have to follow the advice of the council. “But if the board ignores the recommendations of the council, it had better have some really good reasons and rationale… The only question that the board has is that we shouldn’t be ahead of the United States…”

However, board chairman Paul Cherry took a different view. He said the board–not the council–decides accounting standards. Moreover, he sait it was his understanding that the oversight council did not make a recommendation on the policy.

“Our council recommended that the board reconsider the issue,” Mr. Cherry said. “Council did not get into what the right answer is. They did not express a view as to what the [decision] should be.”

The debate revolves around the lucrative stock options that many executives receive as part of their pay package. Some companies already include these options as an expense in their annual and other financial reports, where investors can find them easily.

But under current rules, companies can bury the options in footnotes if they wish, where it is much harder to assess their value and the impact on the company’s bottom line.

And what did get done

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About brucelarochelle

Practising Lawyer and Part-Time University Instructor (Accounting, Commercial Law, Organizational Behaviour); Part-Time Federal Tribunal Member. Non-practising Chartered Professional Accountant (Chartered Accountant and Certified Management Accountant).
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