Accounting, Valuation

Good articles on Employee Stock Options (ESOs)

I was digging around the Net to understand better the issue of expensing of employee stock options for companies.

Initially I had the mistaken idea that companies previously could choose to "capitalize" or expense the option grants, and was wondering how exactly do you "capitalize" an option grant, later I found out that you can't: the old alternative to expensing them is to disclose them in footnotes =)

Another point that I was trying to clarify was whether there is a tax rebate if the tax benefit from stock options is greater than the net income. Turns out that there isn't a rebate, so the actual tax benefit ($cash) shown in the cash flow statement might be less than the calculated benefit using the tax rate.

Good intro series on stock option accounting on Motley Fool:

More detailed accounting and valuation treatment of employee stock options:

Examples of how MSFT and CSCO uses the tax benefits:

General info on employee stock options:

A good link on tax issues for investors:



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