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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs
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To: rkral who started this subject6/10/2002 11:42:18 AM
From: hueyoneRead Replies (1) of 786
 
Hi Ron:

Here are my thoughts on how corporations would implement the Levin/McCain bill were it to be passed:

I suspect corporations are currently taking an expense with the IRS (which we don't see) that equals the difference between the market price and strike price at time of exercise, but I could be wrong. This is different than using the Black Scholes estimates at time of grant.

There are a couple of nuances with the Levin/McCain bill as I understand it so far. It does not actually tell Corporations what method they have to use to determine the stock option compensation expense, nor does it even directly require corporations to expense stock option compensation. It merely says that corporations can only take the compensation expense with the IRS to the same extent that they are reporting the compensation expense to shareholders on the financial statements. My thought is that corporations will want to continue to get the cash flow tax benefit from exercise of stock options that they are currently getting from Uncle Sam, so corporations will likely report the cost as determined by the difference between the strike price and exercise price to both shareholders and the IRS. I could be wrong though. What do you think?

Best, Huey
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