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Intel awaits government move on expensing options

Figuring it's had enough of fighting over options, the chip giant is waiting to see what Congress comes up with.

Intel, whose shareholders have insisted it record stock options as expenses, will probably wait for the government to set rules on the issue, the company told the Securities and Exchange Commission on Monday.

Intel, which last May failed to talk shareholders out of approving a stock options expensing proposal, outlined its thoughts on the timing of putting such a plan in place. The chipmaker, along with Apple, Hewlett-Packard and others, has seen its shareholders go against its recommendation and insist that stock options be listed as expenses.

Providing stock options to employees--a major form of compensation--has generally not been logged as an expense on company's financial statements. Efforts to reform accounting rules have included a drive to require companies to count the value of options as an expense, which cuts into profit figures.

"Our board of directors is analyzing how best to satisfy the advisory vote of our stockholders regarding expensing of stock options," Intel stated in an SEC filing on Monday. "The proposed stock option expensing rules from the Financial Accounting Standards Board (FASB) have not yet been finalized and Congress is also continuing its deliberations on legislative initiatives related to expensing."

The chipmaker told the SEC it is evaluating how it would implement expensing rules according to the current FASB proposals. "But, in the opinion of management, the existing pricing models do not necessarily provide a reliable measure of the fair value of employee options," Intel said. "The company does not believe that it is in the best interests of our stockholders to implement expensing with one of the available option pricing methods until FASB and/or congressional mandates are resolved."

Intel's first-quarter earnings would have been cut by a third if it had been required to expense options, according to a previous SEC filing by the company.

And while investors believe expensing options will provide a clearer picture on the financial performance of a company, Intel executives have previously insisted it would cause greater harm. Intel Chairman Andy Grove has characterized the method as diminishing "the accuracy and clarity" of the company's financial reporting.

Intel is not alone in waiting for Congress to resolve the issue. Apple, in its SEC filing, also said it is awaiting legislators' decisions before moving forward.

"The board and management appreciate and take seriously the views expressed by the company's shareholders," Apple stated in its filing with the SEC. "The company decided not to expense the value of employee stock options until the FASB finalizes its new accounting standard on the matter, which will play a significant role in determining the fair value of and accounting for employee stock options."

The FASB has a proposal that would require companies to expense stock options in their financial statements, rather than mention them only in the footnotes. However, a bill--the Stock Option Accounting Reform Act--that would prevent the SEC from accepting the FASB's proposal as a general accounting principle was passed in the House late last month. It is expected to make its way to the Senate, where the bill enjoys broader support.