NEW YORK (CNN/Money) - The Financial Accounting Standards Board issued a formal proposal Wednesday calling for all forms of stock-based compensation, including options, to be included as an expense on companies' income statements.

YOUR E-MAIL ALERTS Intel Microsoft Corporation Hewlett-Packard Company Cisco or Create your own Manage alerts | What is this?

There has been growing pressure on companies to expense stock options, particularly in the tech sector where options are often a large part of executives' compensation packages. Many tech giants, including Cisco Systems and Intel, have expressed their opposition to stock option expensing plans, claiming they will make it more difficult to retain top talent.

One trade organization, which supports the wide use of stock options as employee compensation at high-tech, manufacturing and services companies, expressed dismay about the FASB's ruling.

"Because FASB's exposure draft will lead to gross overvaluation of employee stock options and corresponding investor confusion, companies will have little choice but to severely curtail or eliminate broad-based employee stock option plans," said Rick White, chairman of the International Employee Stock Options Coalition.

More about options • Running out of options • Stock options plan advances • Microsoft ending options grants

But shareholders of computer and printer giant Hewlett-Packard and software company PeopleSoft approved proposals to expense stock options this month. But the companies are not required to act on these proposals.

Other companies, such as electronics retailer Circuit City, recently agreed to expense stock options. Last year, Microsoft, the world's largest technology company, announced it would no longer give out options to employees. Instead, it decided to award employees restricted stock and include the cost of these stock grants in its income statement.

Currently, companies are only required to list the cost of options programs in the footnotes of their financial statements. Under the new FASB proposal, the expense of options or other equity-based compensation would be measured at fair value on the date the options were granted. For a detailed look at the FASB's proposal, click here.

The FASB will be accepting comments on the proposal until June 30, 2004. A final decision is expected in the second half of the year.

The effects of the rule change, if approved, would probably be most pronounced in the tech sector. But the change would have an impact on the entire market, according to investment research firm Standard & Poor's.

The company said this year's earnings estimates for the S&P 500 would be 7.4 percent lower, after factoring in the cost of stock options. In addition, earnings in 2003 would have been reduced by 8.6 percent.

"A change of 7% or 8% in estimated earnings for the S&P 500 is significant, especially if investors are not fully aware of what caused the change," said David Blitzer, managing director and chairman of the Index Committee at Standard & Poor's.