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To: gzubeck who wrote (155645)	4/11/2005 1:57:36 PM
From: dougSF30	Read Replies (1) \| Respond to of 275872

Good grief! No, the company doesn't. The company just issues the stock to the holder upon exercise.

To: gzubeck who wrote (155645)	4/11/2005 3:14:56 PM
From: Biomaven	Read Replies (2) \| Respond to of 275872

What you describe is one possible method of option expensing - wait and see what actually happens and take that as an expense. It's the method that is actually applied currently if a company reprices its options and gets variable (mark-to-market) accounting. Companies hate it. The actual methodology chosen by FASB is instead grant-date valuation. The company values the option grants when they are made, and that's the end of the story - whether or not they end up having any value is not relevant. The valuation is done using either Black-Scholes (with an adjustment for the term) or a more sophisticated binomial lattice model. It's how I make my living in my day job. Peter