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To: Amy J who wrote (174352)	5/3/2003 10:15:59 AM
From: GVTucker	Read Replies (2) \| Respond to of 186894

Amy, RE: If a startup had to pay cash all the way, maybe they wouldn't be as productive as the startup with the options, or may they wouldn't do it in the USA. Lots of things get done around here on the basis of options. More productive. I didn't maintain that they didn't. My point is that if you pay for something with stock, it is an expense according to GAAP. According to what Duke of URL said, this shouldn't be the case.

To: Amy J who wrote (174352)	5/5/2003 7:38:59 AM
From: Dan3	Read Replies (1) \| Respond to of 186894

Re: Isn't that what startups try to do? Sure. But there's a difference between what's appropriate for a private startup and a decades old publicly traded company.

To: Amy J who wrote (174352)	5/5/2003 10:33:46 AM
From: Tushar Patel	Read Replies (1) \| Respond to of 186894

Isn't that what startups try to do? If a startup had to pay cash all the way, maybe they wouldn't be as productive as the startup with the options, or may they wouldn't do it in the USA. Lots of things get done around here on the basis of options. More productive But conventional options are only one form of non cash compensation. Stock grants, deferred cash payments and other alternatives exist (and in fact may be more efficient in some cases) but these forms need to be expensed. Why not have a level playing field by requiring all forms including stock options be expensed? Then, the startups and companies can decide what compensation mechanism makes most sense for them.

To: Amy J who wrote (174352)	5/5/2003 8:29:06 PM
From: Saturn V	Respond to of 186894

Hi Amy, Expensing options for a Startup by the Black-Scholes Model is not even practical, since there is no public market for the Startup company. The Black Scholes Model requires the value of the Volatility of the stock to calculate the market price of the option. So clearly startups are automatically exempt from the option reporting nonsense. Me thinks that Barret should give up the battle about option expensing. The investment community demands it, and expects it.[ To me the option expense is easily measured by the dilution potential, but it is time to give up the battle]. It makes sense to use the Black Scholes Model, and the Earnings can be reported Before "Option Expense", and After the "Option Expense". The "Option Expense" will have to be adjusted each year to account for expired options due to employee terminations etc, to recapture the expense taken when the option was granted. I am sure that accountants will hate the work required to recapture the value of expired options , but I am sure that this is manageable. All other option expensing methods can give rise to ridiculous results. Expensing it at Option Exercise time will be a mess, since the company has no control over when the employee will chose to exercise the option, and so the P & L will be non-predictable for the company. Non-predictability of a significant expense item is not acceptable for a premier blue chip company. So the Black Scholes Model with earnings before and after Option Expense makes the most sense. Barret is arguing that the Black Scholes Model is a theoretical model and does not reflect reality. But accountants do indeed use other theoretical models. The prime example is Depreciation Expense, which can be calculated using a Linear or Accelerated Depreciation. This is a theoretical number as well, since the actual depreciation is actually dependent upon the market conditions of the Asset being depreciated. Typically the market value of Computers depreciates faster than Accountants assume. Land and Real Estate will typically appreciate instead of depreciating. So typically the true market value of company assets is not the depreciated value. So an adjustment is made when the asset is disposed of, and until then it is carried at a "theoretical book value". So Black Scholes Option Expense is just as "valid" as a Depreciation Expense, and Barret can sign off on it. However Companies which have not gone public cannot have an Option Expense term. However the only problem that I see is that if IRS decides to tax the employee based upon the Black Scholes model, on the date of the exercise of the option. If the Congress or IRS begins that, the Stock Options will die, and so will the High Tech Industry which has the engine powering the growth of the US economy for the last few decades.