On College Football 2022: Week 6 Recap and Week 7 Pre... Ken said: |
Yeah, we've both had our share of hope and disappointment in this game. Let's just hope for a good b... |
On College Football 2022: Week 6 Recap and Week 7 Pre... Dan* said: |
I'm not sure how I feel about this game. On one hand, I feel pretty optimistic that we have the tale... |
On College Football 2022: Week 1 Preview Dan* said: |
Glad to see you'll be back writing football again, Ken! Congrats on the easy win today. You didn't ... |
On College Football 2021: Week 10 Recap and Week 11 P... Ken said: |
Yeah, sorry one of our teams had to lose. I've come to appreciate Penn State as a classy and sympath... |
On College Football 2021: Week 10 Recap and Week 11 P... Dan* said: |
Hey Ken, congratulations on the win yesterday! Some really odd choices by our coaching staff in that... |
Finance: Options Expense Reporting | Sunday, 2004 April 18 - 9:46 am |
In this day of Enron and WorldCom, a lot of folks are up in arms about having companies list outstanding stock option expense on their bottom line. Calpers is going so far as to withhold votes for Apple's board of directors over this issue. But anyone who knows anything about finance should know better. How, exactly, does one report an expense that changes continuously? The potential expense for stock options is dependent on stock price. If the stock price is high, the expense is high, and vice-versa. Suppose a company has 100 million outstanding options at $10 a share, in some particular quarter. If the stock price is $20, would the company report a $1 billion expense? Then, perhaps, the stock would go careening downward. The next quarter, say the stock price is at $10. Does the company now report $1 billion in revenue, to regain what was reported as lost in the previous quarter? Reporting option expenses like that would artificially add volatility to the company's bottom line. It may be possible for someone to come up with a system for reporting option expenses that doesn't have this problem. But it isn't likely to be straightforward. It would be bad for a company to report option expense in a way that makes their financial situation look worse than that of a competitor's; that certainly would be of no benefit to stockholders. The correct solution would be to create a standardized system under GAAP and have all companies report the same way. The solution might involve averaging stock price and amortizing the expense over time, depending on the vesting rate and expiration date of the options. Until that system exists, though, companies (such as Apple) are wise to stay away from reporting what will appear to be disastrous results. |
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