Zeev's Turnips Patch-No Politics (ZEEV)

[Math Junkie]

Regarding the proposal to report an expense when stock options are granted, I was thinking about this and it occured to me that when a company grants an employee a stock option, it's the same thing as if they had sold the employee a stock option and then refunded the purchase price. So from that point of view, yes there is an expense. But that's not the whole story - when they first sold the option they would have to report as income the amount they received from the employee.

Suppose they sold an option worth $1000. Then their income/expense statement would show an item for income of $1000. Then when they refunded the employee's money, they would have to show an expense of $1000. So they would have

Income +$1000.00
Expense -$1000.00
Net 0

In other words, the income and the expense would cancel each other out.

If they want to expense stock options, then they need to report the same amount as income, too. Otherwise it's like trying to pass a law that says 2 + 2 = 6.

I'm all for reigning in stock option abuse among executives, but let's find a way that doesn't involve trying to legislate the laws of mathematics.