Re: And what cost do you impute to them
There is nothing to impute. You simply account for the difference between exercise price and market price at the time the options are exercised. As if the company were like any other option seller, and had to produce market price shares to be sold at the exercise price.
This is actually pretty much what Intel does now, with its repurchase program, except that they fail to account for the costs of buying the exercised option shares. That's whey there's such a big disconnect between Intel's earnings and their assets. They've been showing significant net earnings while total assets actually have been dropping - and much of the discrepancy can be traced to their failure to include the costs of buying back those shares in their accounting for costs.
To Intel's credit, they are better than most companies, and I certainly include AMD in "most companies", which simply dilute their stock with shares from available shelf registrations or release treasury stock. In Intel's case it's pretty easy to see the costs of the employee options dragging down the asset accounts. In the case of companies that dilute shares, it's more subtle.
Either way, costs should be taken to account for options when they are exercised.
Intel should back off from their current position. It is very easy to show a $4 Billion annual discrepancy between their reported earnings and what filters through to the balance sheet, and most of that is due to buying back shares that were sold as exercised options. It's kind of unfair, that a company that at least spent the money to stop option sales from diluting shareholder stock, has made the real costs of these options most clear, and thereby exposed itself to criticism, but that's the way it is. |
