Stock options exercises.

[Alan Su]

David,

i think you're asking how to account for the cashless
exercise-and-sell transaction, rather than how to account for the
value of unexercised options.  if you do in fact mean the latter, this
probably won't help.

first of all, IANAA...this is just my understanding from presentations
by my company's HR folks.  first of all, from what i've been told,
even with a cashless exercise, there may be differences between the
share price at the point when you exercise and the price at the time
when your just-purchased shares are actually sold.  the upshot is that
you may realize a very small amount of capital gain/loss.  so, i would
think about the following variables:

  n: number of options you will exercise
  x: strike price of those options
  p: share price at the moment of share purchase
 p': share price at the moment of share sale
  f: any fees associated with the xact
  t: taxes withheld

absent any other factors and assuming p'>p (i.e., capital gains were
realized), i think the entries you want to make to are something on
the order of

Assets:Checking        n*(p'-x) - f - t
Expenses:Fees                         f
Expenses:Taxes                        t
Income:EquityComp                          n*(p-x)
Income:CapGains                           n*(p'-p)

i'm not sure if this is "proper" in any rigorous accounting sense, but
it makes sense to me!

-alan

On 5/23/07, David Brown <gnucash at davidb.org> wrote:
> I couldn't find any examples or postings on how to deal with stock
> option grants?  Does anyone have any pointers on the proper way to
> record these.
>
> Basically the stock option is an option I have to buy stock.  When I do
> a cashless exercise, the company sells me the shares that I immediately
> sell.  Part of my income from the sale goes to buy the shares in the
> first place, part to tax, and a part to me.
>
> Thanks,
> David Brown
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