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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs -- Ignore unavailable to you. Want to Upgrade?

To: Stock Farmer who wrote (744)	4/28/2005 4:00:32 PM
From: rkral	Respond to of 786

John, re "The present value of a stream of charges due to forfeitures (new 123R) is larger than the charge due to forfeiture in the current year (123)." I don't see that. Recognizing something other than 0% forfeiture will reduce option expense ... but I can't believe the expense reduction can be recognized before the expense itself is recognized. So I'm beginning to think this has to do with Amazon's choice of the accelerated method of expense recognition. (For example, if the stock-based compensation vests linearly over 4 years, (1/4)(1+1/2+1/3+1/4) = 25/48 = 52% of the expense would have been recognized the 1st year. The 2nd year - 13/48 = 27%; 3rd year - 7/48 =15%; and 3rd year - 3/48 = 6%.) IOW there were* excessive stock-based compensation charges in earlier periods ... because the expense was accelerated but the forfeiture was linear. (Ignoring actual vs estimated character of the forfeitures here.) Does that make sense to you? Ron