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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Don Lloyd who wrote (5578)7/25/2000 10:32:24 AM
From: LLCF  Read Replies (1) of 436258
 
<2. Except for ownership structure, the financial variables of the company are unchanged.>

But often variables effect many areas of the accounting statements do they not?? So you can have expenses that are offset in capital accounts no? I can't imagine a case that is more straightforward than this one... these options are salary expenses... it's just a matter of when and how much to allocate them as such. These options are easy to value, and they have a clear opportunity cost... cash bonus.... which the company cannot currently afford.

Example:

You give a code jocky 100k options [options on 100k shares struck @ $100 per share... the stock is trading @ $50... they expire in 10 years] to join the firm. These options are easy to value, and they have a clear opportunity cost... cash bonus.... which the company cannot currently afford. As the stock rallies, the account can be adjusted... ie. the bonus INCREASED.... as the stock falls, the bonus decreased.

<The option grants dilute the existing ownership, and that effect is entirely contained in the resulting increased share count, with no need to additionally adjust the actual revenue or earnings numbers for the company AS A WHOLE.>

I suppose there is 'no need', but clearly this would be incorrect... since option grants are clearly part of the salary, right? How do you justify leaving them out of "salary expense"??

DAK
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