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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Exacctnt who wrote (46757)	2/12/1999 12:57:00 PM
From: Michael Bakunin	Read Replies (1) \| Respond to of 132070

And what, exactly, is wrong with expensing the opportunity cost? A company granting options is giving up the opportunity to sell those options into the market and pay cash. As someone who holds worthless options from a former employer, I know which I'd rather see. If you want companies to buy treasury stock and expense that instead, that's fine, but it seems overkill -- no at-the-money call will ever be worth more than the underlying itself. If I were analyzing a company that did that, I'd back out the expense, fiddle a Black-Scholes approximation of call value, and expense that instead. The issue I have with options grants is how to deal with vesting periods, since many such options are not outright grants (plenty are, mind you). I suspect you'd have to require an actuarial estimate, not too draconian when you require the same for pension liabilities. mb

To: Exacctnt who wrote (46757)	2/12/1999 1:00:00 PM
From: IceShark	Read Replies (1) \| Respond to of 132070

Bob, You are citing the basic argument that companies used to defeat the AICPA task force. I'm saying forget it and take an alternate approach. The option has a discrete value at grant date and that is the economic value bestowed. Even if the option may ultimately turn out to be worthless. The value could be established using an options model, sure it would be a bit sloppy, especially for several year out options. On some stocks the option value might be higher than the then current value of the equity itself. So there would have to be some noodling around on this issue. Regards, Ice