Qualcomm Incorporated (QCOM) Message Board

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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 174.54

-1.2%

Nov 13 3:59 PM EST

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To: cfoe who wrote (125839)	12/5/2002 1:50:56 AM
From: hueyone	Read Replies (1) of 152472

What exactly is the expense that would be recorded? Is it the difference between the option price and the current market price or something else? As Clark noted, there is ongoing debate as to how best record the expense. I used the Black Scholes measurement of option value at time of grant (described by Mucho) since that information is available in the footnotes of the 10ks. In addition, both the FASB in 1993/94 and the IASB just last month recommended using Black Scholes or a binomial model to expense options at time of grant on the income statements. John Shannon advocates expensing at time of exercise as the difference between the strike price and market price at time of exercise. I can give you other ideas, but you asked me to keep it short. 2) Where else in the accounting for revenues and expenses does one transaction - the exercise (actual or implied) of options - get counted twice against EPS (earnings/shares outstanding)? I believe any other share based payments get counted as an expense in accounting. The logic is simple. If a company sells shares to the public and uses the proceeds to pay employees, there is a clear expense. If the company issues those same shares to the employee and the employee sells the shares, there is the same expense to the company for the value of the shares. The two types of transactions are economic equivalents. Options are a little more complicated but essentially should follow the same general logic. I believe stock options are the lone exception to the rule and only fell through the cracks because of lobbying by business and the added difficulty of deciding how best to value options and when to value them. As an accountant, I think you will be interested in Dr. Pacter's 1993 paper on the subject below. Over the years he has been a prominent contributor to FASB and IASB reasearch. nysscpa.org Best, Huey

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