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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: aladin who wrote (60757)	8/7/2002 12:14:26 AM
From: hueyone	Respond to of 77400

John, I am feeling kind of lazy tonight. Most of my views on stock option expensing are posted on the stock option thread. For your additional information, people who oppose expensing stock options also post there: Subject 53027 In a nutshell, however, the expense that Black Scholes tries to estimate (at time of grant) is the future difference between market price and strike price at time of exercise. When the employee actually takes hold of those shares, the shares are worth much more money than the original $14 strike price in your example, and presumably, in an ideal world, the company could have sold those same shares for market price at the time the employee exercises the options. This is the expense to shareholders. The company could have used those proceeds from sale of stock to pay employees with cash, purchase equipment or use the proceeds for a variety of other purposes. Just because that value is transferred to the employee, who himself can then turn around and sell the exercised option at market price on day of exercise, does not mean there is no expense. Finance and accounting professors, (who don't work for Cisco), are nearly unanimous in their opinions that stock options should be expensed: There are some issues on which accounting and finance professors disagree, but the expensing of employee stock options is not one of them. Despite the pronouncements of a few renegades in our disciplines, we believe there is near unanimity of opinion among scholars in the fields of accounting and finance that the value of employee stock options should be expensed on a firm's income statement at the time they are granted. Message 17827507 Best, Huey