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

To: RetiredNow who wrote (63537)	4/13/2003 1:26:10 PM
From: greg s	Read Replies (1) \| Respond to of 77400

re: ISO's are rarely given out because the employee doesn't pay taxes on them when they are exercised. The heck they don't. Please reference Alternate Minimum Tax (AMT). Been there, done that. greg

To: RetiredNow who wrote (63537)	4/13/2003 3:36:28 PM
From: hueyone	Read Replies (1) \| Respond to of 77400

You seem to be ignoring the issue that I clearly raised in my posts. I don't know how I could have made the issue I was seeking clarity on any more clearer than I did in my second post, #reply-18834681, but again, my query to GV Tucker involved trying to discern whether or not the latest "merit based option awards" awarded by Cisco would be considered a performance option that results in an expense on the income statement. (Another less relevant side bar issue, is whether all performance based options are ISOs and whether all ISOs are performance based options. I suspect the two terms are interchangeable, but there could be some nuance differences.) From the examples of stock based compensation in Dr. Pacter's article on CPA Journal Online: Performance Option. Same facts as the fixed options, but with a performance condition that the executives can exercise the options only if the company's revenues increase by a specified percentage during the next two years. If at the end of the two years the revenues increased by the required percentage and the stock price is $50, compensation expense of $1,500,000 is recognized. The substance of all three cases (see other examples in body of article) is that the employees were compensated in the amount of $1,500,000. But in one of the cases--the fixed options- -expense was not recognized, which if anything are more valuable than the other two awards. You can read more on Dr. Pacter's examples here: nysscpa.org From FASB Statement no. 123: Most fixed stock option plans-the most common type of stock compensation plan-have no intrinsic value at grant date, and under Opinion 25 no compensation cost is recognized for them. Compensation cost is recognized for other types of stock-based compensation plans under Opinion 25, including plans with variable, usually performance-based, features. Here is the full summary of FASB Statement No. 123 fasb.org Now if you want to take the position that companies not favoring performance based options has nothing to do with the fact that they result in an expense on the income statement, then I believe you are mistaken. But I don't have time to engage in this side bar debate with you; I am only interested in whether the so called "merit based option wards" recently awarded by Cisco is considered a performance based option that results in an expense on the income statement, and so far no one has answered this question. Regards, Huey

To: RetiredNow who wrote (63537)	4/14/2003 10:12:07 AM
From: rkral	Respond to of 77400

OT ... mindmeld, re " ... there are ISO (Incentive-based Stock Options) and NQ (Non-Qualified Stock Options)." Yes, from the IRS viewpoint, there are 2 types of stock options: qualified (statutory), and non-qualified (non-statutory). Unfortunately, the term incentive-stock-option ("ISO") is commonly used in lieu of qualified-stock-option ("QSO"). And even more unfortunately, many companies apply the term "incentive" to a non-qualified-stock-option ("NQSO"). In doing so, companies contribute to the confusion about options. Regards, Ron