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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs -- Ignore unavailable to you. Want to Upgrade?

To: G_Barr who wrote (164)	8/3/2002 10:02:42 AM
From: hueyone	Read Replies (1) \| Respond to of 786

Good points. Perhaps some sort of phase in program that eventually results in regular front end Black Scholes expensing on the income statements is the way to go. For example, companies could be required to start expensing all options on both their quarterly income reports and 10ks, from this point forward, for options actually issued in 2002 using the Black Scholes estimates. The Black Scholes expense estimates for stock options issued prior to 2002 could remain in the 10K footnotes (over the vesting periods) until expensing for such stock options in the 10K footnotes has run its course. The purpose of such a phase in program would be two fold: 1. Mitigate the potential problem of greatly overestimating the value of all the underwater options that were busted when the bubble popped, and 2. Give companies a chance to gradually adjust to the new reporting requirements. For some companies, adjusting to the new reporting requirements will entail revamping their options compensation programs entirely. I don't think we should let imperfections, which are invariably associated with any new methodology offered to account for stock options expense on the income statements, be used as an excuse not to expense on stock options on the income statements at all. Practically any method that ultimately results in stock option expense being reported on the income statements is preferable to the situation we have now. Best regards, Huey