Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (145466)	8/14/2002 12:18:06 PM
From: Oeconomicus	Read Replies (6) \| Respond to of 164684

Yes, it is simple - at least the principles are. What you don't seem to understand, or refuse to consider, is that the biggest difference between what you want and what exists is simply that FAS-123, the "Fair Value Method" of accounting for stock-based compensation, is optional and you want a mandatory standard. I'm not opposed to a mandatory set of rules to govern the accounting for options - in most cases, a choice between alternate rule sets only creates confusion - and I'm not opposed to a standard that uses the estimated fair value of the options as the expense, as long as that estimate is not engineered so as to overstate or understate the expense. The biggest difference between what you want and what I think is reasonable and logical is simply that you think unearned compensation is an expense regardless of whether it is ever earned or is forfeited and returned to the company, while I and most of the business & accounting world say it is not YET an expense for the simple reason that it has not YET been earned. When it IS earned, it becomes and expense. A simple and clear analogy, which is perfectly applicable here because you have already equated the value of the option with payment of that same amount of cash, is a cash advance of compensation such as a salesman might recieve as a "draw" against future commissions. The cash has been paid, but it has not been earned and has not hit the P&L as an expense. Similarly, an unvested option has not been earned and must be given back to the company if it is never earned, so until it is earned it is not an expense. You will, no doubt, say I'm picking nits over "rules" while you, high-minded soul that you are, are talking "principles" and that working out the rules is a job for lesser beings. But you would be wrong because the very idea that unearned compensation is the same as earned compensation is completely lacking in "principles." As for rules, they already exist, though they might benefit from a little refinement as anything man-made, and all that really needs to happen to enforce the principle is that they be made mandatory instead of optional.