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Technology Stocks : Intel Corporation (INTC)
INTC 48.92+0.4%11:49 AM EST
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To: tcmay who wrote (173090)2/17/2003 5:05:43 PM
From: Windsock  Read Replies (2) of 186894
 
There are some big valuation problems for stock options whether you look at the company treatment as an expense or as income for the employee.

First consider the case for a company that has an employee who leaves and surrenders the 4 or 5 years worth of options in the pipeline. Does the company now get to declare "earnings" for the value of the returned options? This could really distort earnings particularly for older options if the stock has risen in value considerably.

Now consider the employee. What happens when (s)he leaves the company company? Are the tax payments for the options returned or do you treat the option surrender as a "capital loss" that can only be offset for the most part against a capital gain? The same problem arises for vested options that are underwater and expire or are abandoned when the employee leaves.

Stock options that are traded on the open market have accurate market-value pricing and answers for these questions but employee stock options have some very large issues.
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