Baseball Crank
Covering the Front and Back Pages of the Newspaper
April 1, 2004
BUSINESS: Accounting For Options

Kevin Drum links to this Gregg Easterbrook item arguing for treating stock options as an expense . . . granted, I'm a lawyer not an accountant, but as I explained in one of my earliest entries on this blog (one that drew a response from the author of a WSJ op-ed) I still don't understand why options should be an expense rather than a contingent liability that's expensed when exercised. Easterbrook's example of a company giving away land is entirely bogus, since granting an option gives away (duh!) an option to buy stock, not the stock itself. You can estimate the potential cost, but the real cost to the company isn't realized until when-and-if the option is exercised (and not all options are exercised, especially given that stock prices sometimes go down, not up).

PS - In the same item, Drum also argues that the Easterbrook item I cited yesterday on Richard Clarke and Iraq missed a few public statements Clarke did make at the time, although Easterbrook's larger point still stands about the gap between Clarke's present level of outrage and his willingness to speak out at the time.

Posted by Baseball Crank at 6:21 AM | Business | Comments (0) | TrackBack (0)
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