The debate over whether companies should treat stock options as an expense draws mixed reactions from Washington area businesses, some of which have a lot to lose if the accounting rule changes.

A few prolific stock-option users, including mortgage giant Fannie Mae and credit card company Capital One Financial Corp., already expense options on their financial statements.

Options, which are a popular recruitment tool, offer employees and top executives alike a chance to buy company stock at a set price and within a specified time. They are also supposed to be an incentive for executives to push up the stock price and benefit investors.

Some of the region's companies, facing cuts in profits or sharper losses if required to account for options as expenses, continue to resist a proposal by the Financial Accounting Standards Board, which sets accounting rules for companies.

The board is drafting a final rule that could take effect as soon as next year.

The backlash is particularly strong at information technology and biotechnology firms that grant options to attract talented workers.

Human Genome Sciences Inc. would have lost $109 million more than the $185.3 million it reported had it treated options as an expense on its books, according to Thomson Research. Steven C. Mayer, the Rockville biotechnology company's chief financial officer, said that if expensing is required, companies will award fewer options to average employees.

"The first person to lose his options is not going to be the CEO," Mayer said. "That first person is going to be an administrative assistant or the guy on the loading dock. I think it is a very misguided attempt to rein in executive compensation using a tool that will, in fact, harm rank-and-file employees."

Lonnie P. Taylor, vice president for federal and state relations at Reston mobile phone company Nextel Communications Inc., made a similar argument in a June 28 letter to the FASB. Nextel's 2003 profit would have been $325 million lower if it had been forced to treat options as an expense, according to Thomson Research.

Both companies award options to all employees.

Jack T. Ciesielski, a longtime Baltimore investment analyst and editor of the Analyst's Accounting Observer newsletter, told a Senate subcommittee in April that companies listed on the S&P 500 had overstated earnings by more than $175 billion from 1995 to 2002 by not counting options as an expense.

Companies are now required to estimate the value of options in a footnote to their Securities and Exchange Commission filings, but are not required to list them as a cost on their income statements. Expensing options will not have an effect on cash flow but will change the amount of profit companies report.

Outside the technology business, many companies are voluntarily moving to expensing, analysts said. More than 500 U.S. public companies have said they will voluntarily expense options as of last month, Bear Stearns & Co. analyst Chris Senyek said.

"More companies are moving in that direction, clearly," Senyek said. "We've certainly seen a shift for non-tech companies, particularly amongst the companies in the financial sector."

Several companies that have decided to expense options are, at the same time, changing their compensation structure to limit the number of options they award.

At District-based Fannie Mae, one of the first local companies to announce it would voluntarily expense options, spokeswoman Janis Smith said the company is now giving workers more restricted stock awards and fewer stock options.

Executives, according to Fannie Mae's latest proxy, are getting more Long Term Incentive Plan payments -- $11.6 million for Franklin D. Raines, the chairman, a raise of $4.4 million -- and fewer stock options. These incentive payments already had to be expensed on the company's books, but they have tax benefits.

At the giant Bethesda hotel company Marriott International Inc., which does not expense options, the company started giving executives more restricted stock and fewer stock options in February 2003, spokesman Thomas Marder said.

Companies such as Marriott and Lockheed Martin Corp. say they will treat options as an expense if they are eventually required to do so. But that hasn't stopped many local firms from seeking a delay in when the rule will take effect. Lockheed controller Rajeev Bhalla recently asked the accounting standards board for a one-year delay in implementing the rule. Bhalla cited increasing workloads for accounting and finance staff members trying to comply with other new accounting rules.

Staff researcher Richard Drezen contributed to this report.

Steven C. Mayer, Human Genome Sciences chief financial officer, testified in July before a House Energy and Commerce subcommittee on proposals for expensing stock options.