This makes me think that several years from now, we will be encouraging companies NOT to expense options – because it is too easy to manipulate earnings using option value estimates.
Shareholders rarely get a glimpse of the future. Yet in the past few months, they've been given a peek at what they may be in for if companies are required to include the cost of employee stock options on their financial statements, which now seems all but certain. It's not pretty. If 2002 is any indication, options will likely have a huge impact on profits, slicing 20% off reported earnings. Worse, in solving one problem by forcing companies to recognize that options have a cost, we've created something equally complex: Shareholders will have no way of knowing whether their companies are accurately estimating expenses or engaging in wishful thinking to burnish the bottom line.
I personally don't care whether or not they are expensed. I just want to see the raw information out there and not buried in a footnote somewhere.