Let's hope the NVDA's 74% reduction at TSMC is not going to be the norm or we'll be seeing "hard evidence of a back breaking decline in future chip sales"!
From the ncpa:
EXPENSE STOCK OPTIONS
Nearly all scholars in the fields of accounting and finance
believe that the value of employee stock options should be
expensed on a firm's income statement at the time they are
granted.
There are compelling reasons for this:
o When a company grants options to employees, it has given
up something that has considerable value -- and that value
can be determined by using competitive bids from
investment banks, or inferred from the prices of other
securities that are traded on markets, or through the use
of mathematical formulae and models.
o Although grants of stock options may not involve cash
outlays, companies do record outright grants of stock to
employees as compensation, as well as future employee
pension benefits -- and stock options should be treated
the same way.
o The value of a stock option to a company is its cost --
the cash foregone by granting the options to an employee
rather than selling them to external investors -- not its
value to the person who receives it.
Opponents of expensing argue, on the one hand, that the
information is already disclosed in footnotes to corporate
financial statements, and, on the other hand, that expensing
would hurt companies. But if deducting the expense of options
that are already disclosed in footnotes would drive the stock
price down, then the disclosure alone was inadequate to capture
the underlying economic reality.
Source: Zvi Bodie, Robert S. Kaplan and Robert C. Merton,
"Options Should Be Reflected in the Bottom Line," Wall Street
Journal, August 1, 2002.
online.wsj.com
For more on Corporate Employee Compensation
ncpa.org |
