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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 78.64

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10:17 AM EST

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To: BWAC who wrote (61150)	8/29/2002 3:55:17 PM
From: rkral	Read Replies (1) of 77400

OT ... BWAC, re restrictions on options willcousa: "most employee options are subject to subsantial restrictions also" BWAC: "Excellent point. That would require quite an adjustment to the Black Scholes model they would like to base the estimates on." Most options are non-qualified stock options (NQSOs), and the only "restriction" is the rendering of services by the employee. This is referred to as the vesting requirement (schedule). While the vesting requirements are being satisfied, the options are considered non-vested options, not restricted options. "Adjustment" for vesting requirements is not currently made by adjusting the Black-Scholes model. It is effectively made when estimating the "option life", which is an input to the Black-Scholes model. Ron P.S. The accounting profession clearly considered the option value (on the day of grant) as compensation way back in 1995 when the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 123 (FAS 123) , titled "Accounting for Stock-Based Compensation". That includes stock options.

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