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To: GST who wrote (145341)	8/13/2002 12:51:27 PM
From: Oeconomicus	Respond to of 164684

In order, 1) calculate it then, but expense it as it's earned. 2)a) If they sold the option in the market, once the buyer pays the cash, he need do nothing else to "earn" the right to exercise the option - the employee does not yet own that right. b) Of course it's theoretical - Black-Scholes is a theory for valuing options; 3)a) Valuing the option to estimate the expense is only a proxy for the cash value of the work. If you gave the employee the choice between cash and options, you would not need to estimate the value of the option. Nor would you if you sold options publicly and used the proceeds to pay employees. b) If you gave an employee a cash advance against future work and he would have to return the cash if he quit, would you expense the advance now or treat it as a prepaid expense? If you took it as an expense based on the assumption he would earn it, essentially your argument, wouldn't you then have to recognize income when he quits and repays the advance? 4)a) What do you mean "nothing is owed the company" if he quits? Does he not forfeit the option? Does it not have value at that time just because it's not cash? Can't have it both ways, GST. Of course the option is an asset for the employee. b) I didn't say the option was an asset for the comapny - it is the value of the work the employee must do to earn the option that is the asset. The company has advanced him compensation against future work. See 3)b) above.