Apple must expense stock options

Discussion in 'Current Events' started by yamabushi, Dec 20, 2004.

  1. yamabushi macrumors 65816

    yamabushi

    Joined:
    Oct 6, 2003
    #1
    Starting in 2005 Apple must expense stock options due to a FASB ruling. Reported profits will be reduced dramatically as a result.


    Full story at Macworld UK
     
  2. Sun Baked macrumors G5

    Sun Baked

    Joined:
    May 19, 2002
    #2
    It'll probably turn quite a few balance sheets negative, stock options aren't exactly cheap if the company has to buy shares on the open market to cover shortfalls.

    ---

    Your choice, dilution or open market repurchase...

    If you haven't kept either in check...
     
  3. topicolo macrumors 68000

    topicolo

    Joined:
    Jun 4, 2002
    Location:
    Ottawa, ON
    #3
    Apple doesn't "buy" anything. There is no extra money exchanging hands--this is a change in the accounting methods. This means that any options that apple hands out to its employees must be recorded as an expense, regardless of whether an employee chooses to exercise his option to buy apple stock at whatever cost the options allows them to.

    If the option lets someone buy apple shares at a price lower than the market value, then the options will guarantee a profit if they are exercised and so the options themselves have a value, and must be thus be expensed.

    The best thing that will come out of this is is that now that handing out options will show up on the balance sheet, companies won't be able to dish out loads of options every year without having to beat their annual/quarterly reports with an ugly stick in the process. This means that investors will not have the value of their shares secretly diluted by companies.

    And That's a Good Thing (TM)
     
  4. Sun Baked macrumors G5

    Sun Baked

    Joined:
    May 19, 2002
    #4
    Some of these companies who have stock option plans have issued all nearly all the stock, they can -- before things start becoming a painful problem.

    Companies like MS are always buying stock to keep the dillution of the stock options from eating into the company stats.

    So, the options have been costing them quite a bit in reality, and expensing them will shed a buttload of light on the FASB's version of the "option cost"
     

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