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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (38679)	5/4/2003 1:24:02 PM
From: sun-tzu	Read Replies (2) \| Respond to of 57110

we're in agreement...probably coming from different angles too. bizarre strength eh?

To: Jorj X Mckie who wrote (38679)	5/4/2003 1:25:40 PM
From: Frederick Langford	Respond to of 57110

More on Expensing Options... From WSJ: FASB'S OPTIONS At Merrill Lynch's Hardware Heaven investor conference, last week in San Francisco, the presenting firms took the occasion to lambaste accounting proposals to treat employee stock options as an expense. Both the London-based International Accounting Standards Board and the U.S. Financial Accounting Standards Board have backed option expensing. Under FASB, the options would be valued using an approach based on a mathematical model known as Black-Scholes -- originally developed for exchange-traded options. The FASB plan would actually tweak the Black-Scholes method, to account for the fact that employees exercise their options rather early in the seven-to-ten year life of the typical option. Despite industry criticism of FASB's approach to option valuation, an impressive new study by several professors shows that the organization's method is just about as good as the most state-of-the-art valuation techniques. Using a unique database, Portland State University professor John Bizjak and his collaborators studied over 100,000 option exercises at more than 3,000 firms. Bizjak's currently a fellow at the SEC, but he doesn't speak for the Commission. Based on the behavior of those employees, Bizjak developed an exotic model that took into account the volatility of high-tech stocks, and the wealth difference among employees. After all was said and done, the FASB approach estimates a higher cost for high-tech options, than does Bizjak's state-of-the-art approach, but not by much. For a low-volatility firm like Boeing, Bizjak's approach valued 2001 year options at $1.7 million, compared with $1.8 million under FASB's methodology. For Internet darling Amazon, the fancy method figured a 2001 year cost for options of $19.5 million, compared with $20.6 million by FASB reckoning. Big difference. Fred