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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 77.76

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Dec 4 3:59 PM EST

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To: hueyone who wrote (59745)	6/8/2002 5:58:43 PM
From: rkral	Read Replies (2) of 77400

I wonder if you have run into a link explaining SFAS 123 anywhere. I looked on the FASB web site, but I was unable to find one. hueyone, no luck here finding the one I had .. must not have saved it. It was a .edu site with a copy .. both a summary and the details. I've never had any luck on the FASB website either. Then the info goes on to to give us an net income (loss) "as reported" of (1.014 billion), but a pro forma net income (loss) that takes into account SFAS rule 123 of (2.705 billion). Thus the option expense is $1.69 billion. You've probably seen the numbers of $2.6B and $2.8B (as I recall) in articles recently posted on this thread. I've no idea how the authors arrived at those. It looks like to me that fair value of the options is estimated at time of grant using Black Scholes. Well, does the pro forma number above just include options that were granted during that particular fiscal year? I agree on the opening sentence .. but no to the question. The option grant expense of any one year is amortized somehow based on the vesting schedule of the option. (That's why I'm looking for SFAS 123 myself.) My guess: Repeated for all options granted, i.e., for different grant dates and for different vesting schedules. Repeated for grants of previous years. Add 'em up .. and roll 'em out. Oops. That was Rawhide. The value is calculated (estimated) once at grant using the Black Scholes model and then is left alone. Is this correct? That is correct IMHO. I've never seen grant option expenses restated. Next, when the company finally reports employee stock option as on expense to the IRS on its tax returns, does your research put you in agreement with JS and Goren that the expense companies are reporting is the actual difference between the strike price and exercise price (and therefore has have nothing to do with the expense as estimated with Black Scholes in the 10ks)?. I agree with the substance. Exceptions: JS and I don't agree. I don't know what Goren's position is. Ron P.S. That's enough on options for a while. See you Monday.

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