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 : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: BWAC who wrote (63363)	3/17/2003 12:50:22 AM
From: hueyone	Respond to of 77400

Cost on the balance sheet? And this gem is from the SEC chairman? Levitt is referring to the 1993 FASB proposal, which provided for the cost to initially be recognized in the employer's balance sheet both as an asset (prepaid compensation) and as an element of stockholders' equity (stock options outstanding). This cost would later be amortized as compensation expense over the vesting period of the option. See the fourth provision in the summary of the 1993 FASB proposal below. By the way, that entire interview with Levitt is a pretty interesting read. The stock options related portion of the interview that I posted only comprises a small part of the interview. The 1993 FASB Proposal On June 30, 1993, the FASB published its proposed standards for measuring compensation cost for all stock-based compensation awards. Key provisions: 1. Accounting should treat all stock-based compensation in the same way, including fixed and variable stock options, SARs, and restricted stock. 2. Stock options and other stock-based awards have value and are part of compensation cost that should be recognized by the employer. 3. Compensation cost would be measured on the grant date based on the fair value of the award for all stock-based compensation awards net of grants that are not expected to vest. 4. On grant date, that cost would initially be recognized in the employer's balance sheet both as an asset (prepaid compensation) and as an element of stockholders' equity (stock options outstanding). 5. The asset would be amortized as compensation expense over the service period--the period of employee service for which the compensation is deemed to be earned, usually the vesting period unless that terms of the grant specify a shorter service period. 6. Public companies will use option-pricing models, such as the Black- Scholes o binomial models, to estimate the fair value of their options. Nonpublic companies may use the minimum value method, which does not require an estimate of the expected volatility of the underlying stock. Minimum value captures only the component of fair value that stems from the ability to defer payment of the exercise price until the option is exercised. 7. The initial measurement of compensation (both the asset and stockholders' equity item) that was based on the value of the award at grant date would later be adjusted, if necessary, to reflect the outcome of any performance conditions or service-related factors. Those subsequent adjustments could result in zero cumulative compensation expense being recognized if the options ultimately are forfeited or not earned. However, compensation cost would not be adjusted for changes in the stock price after the grant date. nysscpa.org Regards, Huey

To: BWAC who wrote (63363)	3/17/2003 12:55:17 AM
From: rkral	Respond to of 77400

OT ... BWAC, re "Cost on the balance sheet? And this gem is from the SEC chairman? If his goal is to put the "cost" on the balance sheet, it is already there. Fully diluted shares. " LOL! Your statement is more inaccurate than Arthur Levitt's. Increased cost on Statements of Operation (Income) does decrease Net Income which results in decreased Retained Earnings on the Balance Sheet. And with a BSBA in Accounting and Finance, I'm sure you know that. So why disparage Mr. Levitt with a nitpick based on a technicality? But your posit of "fully diluted shares - already there - on the balance sheet", however, is simply untrue. See my #reply-18706612 to exactly the same point by a poster on the Intel thread. Regards, Ron edit: I see Huey has given the more approprate explanation of "cost on the balance sheet", but I'll let this post stand as is.