Financial Accounting Blog

Wednesday, March 24, 2004

Stock Options. Shareholders want tech firm to change accounting. Recently, shareholders voted that Hewlett- Packard start subtracting the cost of employee stock options from its reported profits. This is one of the biggest losses experienced by a technology company in the growing war over expense options. While other industries are suffering comparable defeats, tech industries are taking the biggest hit because of their widespread use of options.
H-P, the second-biggest computer maker after IBM, would have reported extra costs of $2.3 billion over the past three years if it had been required to expense options, according to footnotes to its accounts. That would have left it with combined profits over the same period of only $212 million, rather than the $2.5 billion it actually reported. Calling on shareholders before the meeting to reject the proposal, H-P said that it already gave enough information in the footnotes to its accounts to assess the cost of options.