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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs
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To: rkral who wrote (55)6/15/2002 4:19:40 PM
From: hueyoneRead Replies (1) of 786
 
From the Wall Street Journal article:

Companies presently have a choice in how they account for compensation expense associated with stock-option grants -- an intrinsic-value approach or a fair-value approach. Under the intrinsic-value approach compensation expense is recorded for the option's intrinsic value. This is the amount by which the exercise price of an option granted is exceeded by the market price of the underlying stock on the measurement date, typically the date of grant. With the fair-value approach compensation expense is recorded for the estimated fair value of the options granted using an established valuation model such as the Black-Scholes option-pricing model. With both approaches any compensation expense recorded is spread over the estimated service period of the recipient, usually the vesting period.

Would you agree to conclude from the last line that I highlighted, that the pre tax stock option compensation expense estimate using Black Scholes is generally amortized over three or four years (vesting periods) and that Siebel's corresponding after tax reduction of 766M is not just reflective of the Black Scholes estimates of the value of grants handed out in year 2001, but instead is reflective of the aggregate sum of a portion of the estimated value of grants handed out in 1998, 1999, 2000 and 2001 (or whatever the vesting period is)?

Best, Huey
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