R2O, re "Which PUBLIC companies GIVE STOCK to employees?"
Microsoft, for one.
re "But the subject didn't come up."
Sure it did, I just raised it, trying to show you granting stock with a vesting schedule differs little from granting options with the same vesting schedule. The exercise price is just $0 (usually) instead of FMV (on the grant date) ... and the "exercise" is automatic.
re "But the state of the company is the same before and after the option grant-exercise cycle ..."
Economic equivalence of the starting and ending points does not mean the accounting for two different paths between those points must be the same.
re "Would selling a call option also be a financing activity? Would it only become a financing activity on being called?
What would it be before that? When an option is exercised, is that a financing activity? Should be, yes?"
Selling a stock, selling a call option that expires, and selling a call that is exercised are *all* financing activities IMO. Why? Well, the simple answer is ... that makes more sense than saying any of them is an operating activity or an investing activity.
re "We sell company shares in return for money. Sometimes we sell it at a discount to current FMV (option exercise). I would suggest that we account for this in the same manner no matter who the buyer. Why shouldn't getting paid for stock via an employee stock option also be a financing activity? "
It shouldn't. Where did I write anything to indicate I thought otherwise?
re "Options are usually granted in anticipation of future service. That's, after all, why they have an exercise date. "
I didn't even imply the option was for awarded for past service.
re "If an option is granted to a non-employee it would still be an expense (but not employee compensation), yes? And if a stock warrant is issued, is that also a present expense?"
AFAIK, 'yes' and 'yes'.
re "I come back to other forms of compensation that are not 'pay check' related, such as a corner office, better parking, private lunch room, etc ..................."
I don't see the relevance. The aim of FASB SFAS 123R is to expense fixed options granted to employees. The costs of the corner office, the parking lot, the private lunch room, etc., etc., etc., etc., are expensed. Whether or not these expenses are categorized as compensation seems comparatively trivial.
re "The present methods (and 123R) make it almost impossible (even for auditors) to determine if somebody is cooking the books. "
While there is a *lot* of wiggle room in applying Black-Scholes, it's not that difficult IMO. And it's doubtful the result will be less accurate than saying the expense is $0.
re "I am sure 123 demands a full detailed accounting (including data used to calculate the probabilities) of the option expense calculations. I am sure. "
I'm not sure. Now that 123R has gotten the expense into the income statement, we may be deprived of the details used to arrive at that expense. I hope not.
Ron |
