Given this ludicrous accounting, I wonder why companies don't issue far more options. For example, why should options only be used as a form of compensation? Why not pay other expenses like rent and advertising with stock options? It sounds silly, but theoretically a company could pay nearly all of its expenses with stock options and then report amazing (read: artificial) results...
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Companies typically argue that it's hard to value options precisely, but this is rubbish: There are innumerable items in financial statements -- pension costs, allowances for doubtful accounts and so forth -- that cannot be known precisely, and thus are estimated. Also, companies are already required to report what earnings would have been were options expensed, but in a lame compromise adopted in 1995, such information is only reported once a year -- and is buried deep in the footnotes of the 10-K filing...
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Accounting It allows these companies to hire executives with stock options that normally command large salaries. The APB Opinion No. 5 said that companies were not required to recognize compensation expense when they issued stock options to executives and employees if those options had an exercise price equal to or higher then the stock’s market price on the date the options were granted...	3 / 744
two types of options Nonqualified stock options (NSOs) are the most popular type of options offered today. The recipient employee does not pay income tax when the NSOs are granted (except in rare cases)...	1 / 162
two types of options commonly used as employee compensation Nonqualified stock options (NSOs) are the most popular type of options offered today. The recipient employee does not pay income tax when the NSOs are granted (except in rare cases)...	1 / 162
A Brief Understanding of Backdating Stock Options Reyes, once listed on the Forbes 400 list, now faces 20 years in prison and a $5 million fine.(2)” Sources: (1) http://news.cnet.com/FAQ-Behind-the-stock-options-uproar/2100-1014_3-6098457...	1 / 252