IBM Agrees To Expense Options

from the no-big-deal dept

Just a few months before being required to, IBM is saying that they, too, will join with some other companies in agreeing to expense stock options. Once again, this whole debate seems sort of silly. For most companies, the idea of expensing stock options is pointless. The expense will be a made up number, and won’t accurately reflect anything when it shows up on the income statement (the details of stock option plans are already available in financial statements — just not as an expense). However, those who seem to be claiming that this will be the end of startups are probably overreacting as well. Most folks on Wall Street are smart enough to understand how the change in the accounting rules impacts the company’s bottom line, and since this doesn’t change the cash position of the company in any real way it shouldn’t really impact much of anything. Certainly, a few companies will want to get rid of, or offer fewer, stock options — but other methods of compensating employees for taking risks will become more popular, or companies will realize that the increased expense on their income statement really doesn’t matter that much in the long term when the benefit is that they can attract better talent.

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