SHARE OPTIONS: The treatment of share options and leasing contracts are among some of the controversial issues being considered by the International Accounting Standards Board in drafting a single set of global accounting standards.

The board, which aims to have an international set of standards agreed by 2005, is going through the existing rules and will shortly announce amendments to 12 of the existing 40 standards.

"Then the big changes will come," said board chairman Sir David Tweedie, in Dublin yesterday to address the Institute of Chartered Accountants in Ireland (ICAI).

The board plans to produce a single set of standards drawn from the best existing practices worldwide.

If no national standard adequately addresses a particular problem, as may be the case in accounting for leases or share-based payments, the board will work toward an international standard that does, he said.

On share-based payments, the board suggests that companies be required to charge share options through the profit-and-loss account, a move that would have significant implications for the high-tech sector in particular.

Such a requirement could hit US company profits by an estimated 9 per cent, with the impact on the high-tech sector in the US being even greater at 33 per cent.

As regards leasing contracts, it says they should be on the balance sheet, a change that would make a big difference to airlines for example, many of whom have their aircraft leasing liabilities off balance sheet.

Other proposed changes include the abolition of merger accounting and the ending of the amortisation of goodwill, replacing it instead with an impairment approach.

The board also plans to consider the accounting treatment of special-purpose vehicles, revenue recognition and pensions, where standards in Britain and the Republic are tougher than they are internationally following the introduction of FRS 17.

In general terms, a principles-based approach was the best way forward in drafting global standards rather than a rules-based one, Sir David told the ICAI.

"The real danger of any accounting standard is that, if you have a precise rule, then people know what to do to beat it," he said.

"It is well known that it takes the US Financial Accounting Standards Board four years to invent a rule and four minutes for investment banks to find a way around it."