The House vote was 312-111, with 198 Republicans and 114 Democrats voting for the bill that would block a proposal by the rule-setting board for accounting. The board is seeking to force publicly traded companies to record as an expense all forms of share-based payments to employees, including stock options.

The rule change proposed by the Financial Accounting Standards Board in March could dramatically reduce the reported earnings of many big companies, particularly in the high-tech industry where stock options for employees have been popular.

Federal Reserve Chairman Alan Greenspan, a proponent of mandatory expensing and FASB's proposal, told senators at Banking Committee hearing Tuesday, "I would be most concerned if Congress intervened." Of the rule-setting board, he said, "I think they do a good job. It's a tough job."

That committee's chairman, Sen. Richard Shelby, R-Ala., agreed with Greenspan's stance. He derided the House action as "political interference" in the work of independent accounting experts. "I will continue to fight any effort to pass similar legislation in the Senate," he said.

The House-passed measure, sponsored by Reps. Richard Baker, R-La., and Anna Eshoo, D-Calif., would limit required expensing of options to those owned by a corporation's top five executives. It also would allow newly public companies to delay expensing for top executives in the first three years.

Advocates of mandatory expensing also include Securities and Exchange Commission Chairman William Donaldson, billionaire investor Warren Buffett and the Big Four accounting firms.

Some blame stock options for fueling recent corporate abuses. They say options entice executives to manipulate earnings to pump up stock prices and then sell their lucrative personal holdings. Still, options remain a popular compensation tool to help motivate employees, who can buy shares at a fixed price and sell at a profit if the company's stock rises.

In House debate, supporters of the legislation insisted that a mandate to count options against the bottom line would complicate income statements, discourage startup companies and hurt the economy by stifling future innovation.

"It would have a negative, real-world policy impact" and "choke off job growth," said Rep. Pete Sessions, R-Texas.

Backers also said it was impossible to determine the value of options.

The FASB proposal answered the call for accurate financial statements that came after a string of corporate scandals, starting with Enron.

But supporters of the bill maintained Tuesday that the rule would unfairly punish an estimated 14 million rank-and-file employees for the abuses of a few top executives who manipulated earnings.

Companies now need not record the cost of options as an expense on their financial statements, though hundreds have begun to do so voluntarily. Instead, they must only include the potential cost in a footnote, making it difficult for investors to gauge their impact on earnings.

Not requiring options to be expensed "runs the grave risk of inflating a company's profits and misleading investors," warned Rep. Alcee Hastings, D-Fla.

Fighting mandatory expensing are members of a lobbying coalition that includes Agilent Technologies, Cisco Systems, Coors Brewing, Dell, General Mills, Intel and Sun Microsystems. Also opposed are the Nasdaq Stock Market, home to numerous big high-tech companies; the National Association of Manufacturers; the U.S. Chamber of Commerce, and the Business Roundtable, which represents chief executives of the largest U.S. corporations.

If the FASB proposal is approved, it would take effect Dec. 15.

FASB Chairman Robert Herz said last month the panel may delay a final rule because corporate America already is facing deadlines to implement other new regulations enacted in 2002 in response to the scandals. Donald Nicolaisen, the SEC's chief accountant, has said FASB should consider delaying the rule to 2006.

-- Marcy Gordon