The new international financial reporting standards (IFRS) will reduce the incidence of corporate fraud, according to the chairman of the International Accounting Standards Board.
The Financial Times reported that Sir David Tweedie said the IASB's rules would deliver greater transparency allowing investors to spot fraud.
The IASB is developing EU-wide accounting standards that will affect all companies listed on EU stock exchanges.
The IASB's initiative is due to be replicated in the US as the Financial Accounting Standards Board, the IASB's counterpart in the US, is expected to publish similar rules in draft next month.
Tweedie said big awards of options had provided incentives for frauds. Some people in management had sought to ramp up share prices to maximise their gains when the options were exercised, he said.
The IASB's rules will enable investors to spot if directors are getting big awards of options because the cost will be recognised in income statements.
"If people really start dishing them out, it is going to start to show," Tweedie said.
Under the IASB's standard on share-based payments, companies that issue options to employees must treat them as expenses.
Companies must make deductions from profits from when the options are granted until the earliest time they can be exercised.
The cost is based on the fair or market value of the options. The IASB's rules take effect from January 2005.
