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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (174587)	5/14/2003 5:56:09 PM
From: Saturn V	Read Replies (1) \| Respond to of 186894

Ref < Why not just award leap calls, and expense them. Hold them in a trust to expiration, when the employee could cash them in or exercise them, or let them expire if worthless. No dilution, and the market determines the value of the options for expense purposes> This is very close to the Blck-Scholes method of expensing,since the Leaps are indeed priced by the BlACK-SCHOLES MODEL. However the problem that is that the so called expense is not an accounting expense all. I explained that in my recent post on IHUB. investorshub.com The company does not undergo an expense by selling the stock at the option price. The money paid from the option sale to the employee goes to the company capital account. [ The capital account is shareholders equity which consists of money received from sale of stock and retained profits.] Had the stock been sold on the open market, the capital account appreciation would have been greater. So the option is not an expense, but rather a loss of opportunity for the company. Repeat after me: The option is not an expense, but is a lost opportunity for the company. The Black Scholes Expense is one measure of the lost opportunity, since the company could have issued an option on its stock to the market. The other problem is how do you handle companies which are not yet public, since no options are available on the open market. The accounting system has to work the same for both public and private companies. I prefer the dilution method which is applicable to all companies, and is simple enough to implement.