The real expenses for stock options can only be precisely known AFTER the options have been exercised Let's assume a company pays its CEO a salary of $10,000 cash, plus 1,000,000 ounces of gold to be paid in 5 years. What would you record as the CEO salary cost against current earnings? How about if they pay $10,000 plus the right to buy 1,000,000 ounces of gold at $300/oz.?
Let's consider two identical companies. Each company has revenue of $1 billion dollars with non salary expenses of $400 million. Company A pays salaries of $550 million. Company B pays salaries of $50 million, plus options to buy 100,000,000 million shares of stock at $10 per share. For simplicity, let's assume the current price is $10/share. As I understand it, you favor saying that Company A earned $50 million in this period; Company B earned $550 million or 10 times as much. If a valuation of the options (when granted) was $5, I'd say the two companies earned the same amount.
Now let's say, the next period is identical and the price of the stock of B(in the open market) is $20. Now those original options are exercised (Company B prints the certificates at a cost of $150 out of pocket). The value of the bought shares is $2 billion. The value of the exercised options is $1 billion. The company TAKES IN $1 billion in cash in the exercise process. Do you charge the $1 billion to the current period's earnings; do you restate the initial earnings? do you charge the cost of $150 to print the certificates?
You charge ALL of the money that the company paid out as soon as the company cuts checks.
At least, that's what you do under today's accounting rules.
If you change the accounting rules to comply with this ridiculous new "expense options" fad, then the company will have to GUESS at its expenses and mark up its accounting books to reflect first the "guess" at the initial time the options were issued, and then later revise the accounting books to reflect true market value (Oh, and that true market value changes every hour of every business day).
Why?
Why change from using the ACTUAL money that a company is out (i.e. today's existing accounting process) to one where guesses and constant revisions are required (i.e. this new "Expense Options" craze)?
Why change our accounting processes to make large-scale corporate embezellment easier? That's what "expensing options" does. It forces companies to clutter up their accounting books with guesses and revisions that can easily be manipulated by insiders to defraud stock-holders of corporate equity.
In this climate of massive accounting crisis, why would ANYONE support that sort of change?