Ron, "If you're just going to WAG it, I have no interest in continuing this discussion."
Why are you so impatient? Instead of dazzling me with
perceived precision of numbers and nit-picking on dates,
why don't you admit few simple general facts?
One fact is that the option granting scheme is a
recursive process, and is pipelined over a decade.
The other fact is that the practice of option grants
began long before some companies were forced
to buy their stock back to control dilution.
Therefore, when buyback occurred first time, the shares were
effectively reissued to current option exercisers since you
can't claim that those shares were bought some years
ago and the transaction bears no cost - because there
were no buybacks before. Consequently, you can't
claim that the bought-back stock is held to "back up"
newly-issued option grants (because the bought-back pool
was already consumed by current exercisers). This is my
interpretation of option costs, and it is consistent with
initial conditions of the scheme.
Now, apply the same argument to each consecutive quarter
or other characteristic period, it will consistently rolls
over supporting my construction and interpretation of
option costs.
Conclusion: the Elmer's "zero-cost" scheme is wrong.
Actually, I don't need any proof that Elmer's scheme
is wrong because all accounting scholars and governing
bodies already have concluded that options have cost.
The elmer's "zero cost example" contradicts this established
fact, so let's call it "Ephud's option accounting paradox"
for future case studies and accounting-101.
- Ali |
