stock option

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stock option

n. the right to purchase stock in the future at a price set at the time the option is granted (by sale or as compensation by the corporation). To actually obtain the shares of stock the owner of the option must "exercise" the option by paying the agreed upon price and requesting issuance of the shares. (See: stock, share, option)

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Even though most employee stock options are granted at-the-money and so have zero intrinsic value (that is, market price minus exercise price), they have positive value at the grant date because of the volatility value of the option.
Because there is no reference market for employee stock options, SFAS 123 offers companies two ways of presenting their financial reports under Generally Accepted Accounting Principles (GAAP):
Marshall II (Partner, Jones Day), a renowned expert on the topic who has helped hundreds of CEOs and companies update their knowledge this year on important changes to how they should be overseeing and implementing employee stock options, and covers:
Unlike stock options that are traded on an exchange, employee stock options
Since June 15, certain public companies have been accounting for share-based payment transactions--including employee stock option compensation--as an expense, often against their will and better judgment.
As the memory of the technology boom fades, so does the once ubiquitous employee stock option.
Employee stock options - It is proposed that the Board of Directors shall have the possibility to grant employee stock options to the CEO and other members of the executive management.
Further detail on the implementation guidance above can be found in the FERF report mentioned earlier, Valuing Employee Stock Options and Other Share-Based Payments: Complying with FAS 123R, which was published in February.
Companies, especially high-tech, argued that recording employee stock options as a compensation expense would lower their reported earnings and would put them at a competitive disadvantage in the race to raise capital.
Subscription of shares in the company based on warrants shall take place at a subscription price and on other conditions that in all essential aspects shall correspond to the conditions of the employee stock options which the warrants intend to secure.
In August, the Financial Accounting Standards Board (FASB) began the final draft of a rule that will require companies to recognize the cost of employee stock options on their income statements.
123, Accounting for Stock-Based Compensation, companies are required to provide new note disclosures about employee stock options based on their fair value at the date of the grant.

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