This excerpt taken from the HPQ DEF 14A filed Feb 11, 2005.
Policy regarding Stock Option Expensing
At HP's annual meeting of stockholders held in March 2004, a majority of votes cast were voted in favor of an advisory stockholder proposal requesting that the Board establish a policy of expensing the costs of all future stock options issued by HP, and HP announced that it would duly consider this recommendation. The Board appreciates and takes seriously the views expressed by HP stockholders and has carefully deliberated the issues relating to expensing employee stock options over the course of several meetings in order to respond appropriately to this proposal.
HP has sought clarity and guidance from the appropriate authorities on the requirement to expense options and the rules and guidelines for such expensing. Now that these requirements and guidelines have been clarified through the Financial Accounting Standards Board's issuance of Statement of Financial Accounting Standards No. 123 (revised) in December 2004, HP expects to begin expensing all share-based payments to employees, including stock options, in the fourth quarter of 2005.