SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Stock Farmer who wrote (58)6/16/2002 5:06:53 PM
From: rkralRead Replies (1) of 786
 
my knowledge of the intrinsic value method is nil

Sorry about that misleading statement. I just didn't want to go there.

Of course I know what the intrinsic value method is. I also know that most companies choose it because the intrinsic value of an option on the grant date is usually zero. If not zero, then a lot smaller than the number obtained from the fair value method.

My 'nil' was actually a reference to the fact that it is impossible to determine the probable amortization schedule used for the stock-based option expenses .. when the amount being amortized is $0.

Whereas this is not the case for the fair value method, it is possible to determine, e.g., for QCOM and SEBL, that the amortization schedules probably match the vesting schedules (6 years and 5 years, respectively) of their option plans. As such, the first fractional amortization amount occurs in the year following the grant. (An annual linear vesting schedule was assumed.)

Furthermore, the amount so calculated, presumed to be a before-tax amount, is a "best match" when compared to each company's FASB SFAS 123 reported after-tax compensation expense .. WITHOUT making a correction using the effective tax rate. This implies that the SFAS 123 compensation expenses are not reported to the IRS imho.

Example results for QCOM:
Year---------Reported Cost--------Calculated Cost
1999---------$52M-----------------$75M
2000---------$100M----------------$98M
2001---------$167M----------------$175M

Ron

P.S. That the amortization schedules for the intrinsic value and fair value methods would be the same is a logical guess, but I have no evidence to support that.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News