The board that oversees Canada's main accounting regulator says it will consider forcing Canadian companies to expense the cost of employee stock options.

The accounting standards oversight council (ACSOC) said yesterday that it will debate that subject at a meeting in late September, and it wants public comment on the issue before them.

The key question is whether it would be a competitive disadvantage for Canadian companies if Canada's Accounting Standards Board forced them to expense options before the same rule is set in the United States.

ACSOC is an independent board that oversees the standards board.

Brian Gibson, executive vice-president of the Ontario Teachers Pension Plan Board, which has been pressing for mandatory expensing of stock options, described ACSOC's plan as "a very positive move."

Mr. Gibson said there is no evidence that any country with higher standards than others is at a disadvantage when it comes to the cost of capital. "It's actually the opposite," he said.

Some Canadian companies have said in recent months that they will begin to account for employee stock options as an expense, even though that treatment is not mandatory. Some U.S. companies have also begun that practice.

Putting the subject of option accounting at the top of the agenda for the September meeting is "a recognition that this is an issue which must be addressed promptly," said ACSOC chairman Thomas Allen, a Toronto lawyer.

While it is usually an advantage for Canada to act in harmony with changes made in the United States, he said, "you can't just stand back and not do what you may feel is the appropriate thing for accounting purposes."

In Canada, new accounting rules that took effect Jan. 1 require companies to either expense employee stock options or at least identify the expense in footnotes to financial statements. Substantially similar rules are in place in the United States.

In May, Toronto-Dominion Bank became the first Canadian company to say it would voluntarily expense its stock options, beginning with its fiscal year that starts Nov. 1. Since then, several others, including Bank of Montreal and Sun Life Financial Services of Canada Inc., have followed suit.

Some firms have balked, however. Ottawa-based Cognos Inc., for example, has said it is not a good idea until rules are in place that apply to all companies.

Expensing options would have a huge impact on Cognos. If it had included its options cost as a business expense on its fiscal 2002 income statement, its $19.4-million (U.S.) profit would have been wiped out, and the company would have reported a loss of $6.1-million.

Canadian companies that have said they will expense options have decided that it's a competitive advantage to "single themselves out from the pack," Mr. Allen said, and perhaps Canada as a whole could gain if all our companies are forced to do this, when U.S. companies are not.

"You could make a good argument that it would be positive for Canada's capital markets to move first on this issue, and never mind that the Americans aren't there yet."

International accounting regulators have said that options should be expensed, and that, too, adds to the momentum on the issue, Mr. Allen said. "Everybody who is watching this play unfold must surely conclude that options are going to be recognized in income statements in one way or another, at some point."

Still, he insisted, ACSOC has not yet come to any conclusion on the subject, and it will carefully listen to any voices that think expensing options is a bad idea.

Several U.S. companies, including General Motors Corp., General Electric Co., Coca-Cola Co., Wal-Mart Stores Inc. and Merrill Lynch & Co., have decided to expense their stock options, despite the fact they are not required to.