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To: Cary Salsberg who wrote (10746)	11/7/2002 12:54:00 PM
From: Kirk ©	Read Replies (1) \| Respond to of 10921

If a company grants an option at market prices and move shares bought back at lower prices to a reserve account until they are sold for a profit to an employee exercising an option, where is the expense? I don't think it works that way. Moving shares like that is an expense against book value that people want recorded. My thinking is they will have to take an immediate expense equal to the money to buy the stock in the open market to fill the grant price. This would form a reserve. If the stock goes down and the option expires worthless or the employee quits before vesting, then the remaining value could flow back as income. If the stock goes up, they have no additional cost or dillution since the stock is already held for the employee. I think this makes great sense for seeing true employee cost... but it will lower earnings.