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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs
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To: rkral who wrote (57)6/16/2002 11:13:38 PM
From: hueyoneRead Replies (1) of 786
 
From Ron: *So getting back on point .. the stock-based compensation expense due to option exercise is not a real expense .

From the Accounting professor interviewed in the Wall Street Journal: I personally side with those who think that a fair-value approach should be used in recording compensation expense for stock-option grants.

From Ron: As to the Wall Street Journal article, I agree with every word.

Ron, can you see why some folks, including me, may be confused to what your position is? In my view, stock option compensation expense is a real expense whether or not a company is reporting it to shareholders, regardless of whether or not a company is reporting it to the IRS and regardless of the fact it does not reduce cash assets. You writing in big bold letters that stock option compensation is a "phantom expense", or that it is "not a real expense" would tend to make people think you do not believe it is a real expense, regardless of how it is reported to shareholders or the IRS. If this is the case, then you are clearly not in agreement with the accounting professor quoted in the Wall Street Journal article. On the other hand, if you are merely using the expressions "phantom expense" or "not real expenses" as descriptive expressions referring to your opinion of how companies are currently dealing with this item in their reports to the IRS, please make this distinction clear.

online.wsj.com

Best, Huey
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