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

To: hueyone who wrote (244)	8/23/2002 8:38:31 AM
From: Exacctnt	Respond to of 786

<<<<What do you think about the intrinsic value method of expensing stock options that Business Week is promoting in the article below? >>>> The intrinsic value method described in the article is preferable to the rest. It achieves the end result, that being the true difference between the grant price vs. market price at exercise date. Any other method distorts income. The only way the current SFAS 123 method works is if the assumptions used in calculating fair value actually falls in line with the forecast. Fat chance. Yes, income may swing wildly if the intrinsic value method is chosen since it depends upon the market price of the stock. However, do you want an accurate portrayal of the cost of options, or will any method be acceptable as long as an expense appears, right or wrong, with no settlement feature? Regardless of the method actually chosen, be prepared for even more pro forma reporting. Expensing options will result in analysts pulling out the expense from reported income numbers in order to compare true operating earnings.