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To: kech who wrote (122030)	7/24/2002 9:36:09 AM
From: Wyätt Gwyön	Respond to of 152472

yes, i know it is depreciated. i am making a simplistic explanation, which i hope is allowable. however, i think you will realize that once you start depreciating these things, they will quickly accumulate to a 5-10 year rolling average which will not be that much different from just writing the entire amount off up front. that is why the cos who have announced they will expense options tend to say the effect will be "minimal". what they mean is that it will be minimal the first year. but like as not, they will issue options next year, and the next, and the next. with the result that option expenses will accumulate. i believe KO spelled this out in its options expensing roadmap.

To: kech who wrote (122030)	7/24/2002 2:50:21 PM
From: A.L. Reagan	Read Replies (2) \| Respond to of 152472

If it is a long term option grant, that can't be exercised for 5 to 10 years then it is not an expense at the moment it is given. If you did a Black-Scholes valuation as of the vesting date (not PV'd to the grant date) and there is a period of time over which the option vests, agree that the expense should be charged ratably over the vesting period. But by discounting to the present value and factoring in the probability of forefeitures, you would get a similar answer to the multi-year amortization of a grossed-up amount. In reality, most of these option plans seem to have an annual grant feature.