The Canadian Accounting Standards Board (AcSB) is keeping a New Year’s Resolution that stands to benefit Canadian investors who want to see more transparent financial reporting.

Effective Jan. 1, 2004, the AcSB will require public companies to expense all stock-based compensation awards (including stock options), including those made to employees, senior executives and board members.

“From the Accounting Standards Board’s perspective, there is no doubt that stock-based payments are a form of compensation and should be expensed,” said Paul Cherry, chairman of the AcSB. “Once these amendments to our existing standard come into effect, investors, analysts and regulators will have financial statements that better reflect the reality of stock-based payment transactions”

“I’m proud that the Canadian Accounting Standards Board has taken the lead on this important issue,” he added.

The January 1 effective date means Canada will be the first major jurisdiction to require expensing for all public company employee stock-based compensation awards, although Cherry said the intention is to harmonize eventually when U.S. and international standards become effective.

“In order to have a harmonized standard, it may be necessary at a later date for the Canadian board to remove ‘nuisance’ differences if they exist between our standard and FASB’s planned standard, but this should be a relatively simple matter,” said Cherry.

Employee expensing is part of a revision to Section 3870 of the Accounting Standards Handbook, dealing with stock-based payments, and will be effective for financial reporting of public companies for the fiscal years beginning on or after January 1, 2004 (January 1, 2005 for most private companies).