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:
http://www.fool.com/research/2000/features000908.htm
http://www.fool.com/research/2000/features001012.htm
http://www.fool.com/research/2000/features001228.htm

More detailed accounting and valuation treatment of employee stock options:
http://www.investopedia.com/features/eso/eso1.asp

Examples of how MSFT and CSCO uses the tax benefits:
http://www.fool.com/portfolios/rulemaker/2000/rulemaker000217.htm
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2000/10/09/MN3707.DTL

General info on employee stock options:
http://executivecaliber.ws/sys-tmpl/expensingstockoptions/
http://executivecaliber.ws/sys-tmpl/fasbexpensestockoptions/
http://www.feinberglawgroup.com/stockopt.html
http://www.fairmark.com/execcomp/index.htm

A good link on tax issues for investors:
http://invest-faq.com/articles/index-tax.html

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