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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (71106)11/29/1999 1:13:00 PM
From: Chuzzlewit  Read Replies (2) | Respond to of 132070
 
Don,

I think that we are dancing around this issue. We seem to agree that stock options are a cost. We also agreed that accounting rules inadequately disclose the true financial status of a corporation that issues stock options. All that I ask is that they be properly accounted for.

If the example I gave you before demonstrating the absolute financial equivalency of two strategies:

1.Issuance of stock and some of the proceeds are used to pay employees;

2. Issuance of options and the employee exercises the option and sells the stock on the open market.

Why would you resist making changes to the accounting treatment that would reflect the equivalency of the two strategies. In other words, shouldn't the representation of two financially equivalent be unimpaired by the details of the route taken?

However, the expense adjustment approach not only has no economic validity ...

I disagree entirely. If I write a call I will receive cash compensation for the option. I can easily calculate the theoretical value of the option using the B/S model. If a corporation substitutes call options (the value of which is easily quantifiable) for a portion of salary, why should it make an artificial distinction between the two?

In terms of recognition of options for DEPS, my understanding is that the only exclusions are for some contingencies (such as earnings triggers).

TTFN,
CTC



To: Don Lloyd who wrote (71106)11/29/1999 2:08:00 PM
From: Logain Ablar  Read Replies (2) | Respond to of 132070
 
Don:

Out of the money are not included. Once the stock reached a market price where they are in the money they go into the share base for the calculations.

Tim


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