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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 174.01-0.3%Nov 14 9:30 AM EST
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To: carranza2 who wrote (125874)12/5/2002 7:45:45 PM
From: Jim Mullens  Read Replies (2) of 152472
 
carranza2- Thanks for your response. I'm no expert on options either. I think part of the problem is that there are too many experts and not too many agree. Sorta like economists.

This somewhat follows your thinking-

1. No cost to the company if issued from treasury stock & therefore no expense. There is however a potential dilution to existing shareholders if & when exercised. However, at the time of issuance, (as is current practice) the EPS is calculated based on the diluted shares.

2. If treasury stock is not available and stock buy-back on the open market is required, book that cost as an expense. Book the balance sheet entry as an Investment Asset, reduce the shares outstanding (increases the EPS) , and treat the newly purchased shares as treasury stock until reissued .

3. When the stock options are reissued from the newly acquired treasury stock, reduce the balance sheet- Investment Assets, and follow same
procedure (#1), above.

Does the purchase of stock in your own company not qualify as an investment asset, whereas the purchase of stock of another company does qualify as an investment asset? It seems as it should, but others feel that options (share grants) issued from treasury stock should be expensed when the company really did not incur any out of pocket costs. Maybe these questions should be answered by philosophers rather than accountants / economists.

Does this make any sense?
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