Employee Stock Options - NQSOs & ISOs Message Board

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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs

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To: R2O who wrote (760)	8/10/2005 7:07:30 AM
From: rkral	Read Replies (1) of 786

R2O, re "What's the difference between these two? " Selling stock is a financing activity, even if stock is the stock is sold to employees. Since it is not an operating activity, it should not ... and does not ... show up as an expense on an income statement. If stock is granted (at $0) to an employee in exchange for services rendered, there is compensation expense. The expense is the fair market value (FMV) of the stock on the grant date. The the time period that services must be rendered before the employee actually owns the stock ... the vesting period ... is irrelevant. The actual price at the end of the vesting period is irrelevant. If an option is granted (at an exercise price equal to the FMV on the grant date) to an employee in exchange for services rendered, there is also compensation expense. The expense is less than FMV because of the exercise dollars to be received in the future (even though exercise might not occur). The time period between grant and exercise is relevant, but the FMV on the exercise date is not. I have intentionally not addressed the IRS perspective. Ron

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