Companies, particularly those in the high-tech sector, have been up in arms for years over the possibility that they will have to begin expensing stock options granted to employees. And now that the Financial Accounting Standards Board (FASB) has finally issued a set of proposed regulations that would require stock options expensing by 2005, the din from Corporate America is deafening.

But indeed, it may be corporate finance departments that should be howling. The problem is a small preference expressed by the FASB that will make their lives much more difficult, but should at the same time reduce the impact on corporate earnings from the switch to expensing.

In its proposal issued March 31, the FASB encouraged companies to shift to a different, and much more complicated, method of valuing employee stock options. The reason: Lattice-type valuation models, like the binomial method, are more accurate because they take into account more variables than the Black-Scholes formula that most companies use now. Although the regulations don't demand that companies make this change, analysts predict that the preference the FASB expressed is likely to be enough to make most go binomial. Certainly, they say, external auditors may demand it.