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

To: LLCF who wrote (213)	8/18/2002 11:08:45 PM
From: Exacctnt	Read Replies (2) \| Respond to of 786

<<<That MAY be the assumption of SFAS 123, but that is NOT the assumption of BS. >>> Black Scholes is the method used to determine the fair value price or expense of the option. It is not the only method out there. Coke, for instance, said it will use independent parties to come up with a fair value of its granted options. Once fair value is determined, SFAS 123 is FASB's statement on how it is to be accounted. When market prices fluctuate wildly or when a company's business outlook changes dramatically, the amounts expensed at the grant date can be wildly off the mark. Another example of overkill on option expense. Looking over NTAP's Form 10-k shows the fair value price of options granted in 2000, 2001, and 2002 at $13.98, $26.84, and $10.03. The options expected life are 3.2, 3.21, and 3.33 years. NTAP's current market price is $9.17. It's leap call options at $10 strike price for 2003, 2004 and 2005 are currently trading at $1.88, $3.40, and $4.20. Under FASB's SFAS 123, NTAP will be recording the original fair value price over the expected life of the options regardless of the current market price of the stock.