I know Warren Buffett thinks all stock options should be expensed.

But what is the other side of the coin?  
Please suggest 7-10 reasons why stock options should not be expensed.

One-line answers (4-8 word bullets) would be fine with me.

Thanks !!!

Hello.

Here are some of the arguments for not expensing stock options:

"Stock options do not require any actual cash outlays, so should not
be counted on the income statement as compensation costs, as are
salary or bonuses."
From BusinessWeek: "To Expense or Not to Expense"
http://www.businessweek.com/magazine/content/02_30/b3793714.htm

"...if companies decide to curtail the use of options as a result of
having to expense them, they will lose a valuable tool to recruit
employees and motivate executives."
From BusinessWeek: "To Expense or Not to Expense"
http://www.businessweek.com/magazine/content/02_30/b3793714.htm

"the federal budget deficit could take a hit... [I]f the value of
options offered and exercised shrinks by, say, 25%, individual income
tax payments from stock options would drop by about $15 billion."
From BusinessWeek: To Expense or Not to Expense
http://www.businessweek.com/magazine/content/02_30/b3793714.htm

"The options that are going to go away are those that go to
rank-and-file employees,"
From BusinessWeek: To Expense or Not to Expense
http://www.businessweek.com/magazine/content/02_30/b3793714.htm

"Deducting the cost of options will reduce earnings, which is likely
to drive down share prices."
From BusinessWeek: "Why Defenders Disagree"
http://www.businessweek.com/magazine/content/02_30/b3793716.htm

"generous option grants have spurred the risk-taking and
entrepreneurship so crucial to innovation. Expensing options risks
damaging that benefit."
From BusinessWeek: "Why Defenders Disagree"
http://www.businessweek.com/magazine/content/02_30/b3793716.htm


"If companies reduce options, as some have threatened, who's going to
get those that are granted? If you guessed top executives, move on to
the Speed Round."
From the San Jose Mercury:
http://www.siliconvalley.com/mld/siliconvalley/living/4111671.htm

"There is no good valuation model to determine the fair value of
unexercised employee stock options."
From Intel:
http://www.intel.com/pressroom/archive/releases/20020808corp.htm

"Including an unreliable estimate of the fair value of options in the
income statement would distort earnings."
From Intel:
http://www.intel.com/pressroom/archive/releases/20020808corp.htm

"companies should not be forced to account for stock options at a time
when their true value cannot be determined -- before the options are
exercised."
From the Washington Post:
http://www.washingtonpost.com/wp-dyn/articles/A26505-2002Sep16.html

"The expense-'em crowd argues that options represent a real cost to
the company because of opportunity cost. In this view, the company
could sell the options on the open market and collect cash, but it is
foregoing this opportunity and giving the stock to employees. Clearly,
they say, if the company sold options and transferred the cash we
would recognize it as an expense.
This view elides an important consideration: the financial result of
an open-sale-plus-cash transfer would be a wash. Money in would equal
money out. So if you treat a grant of options as the equivalent of
this, it would be strange to recognize the pay-out without recognizing
the income. But is it operating revenue?" From:
Don?t Run The Options: Expensing Proposals Raise Difficult Practical
Questions
DeLong Op-Ed in National Review Online by James V. DeLong 
July 25, 2002 
http://www.cei.org/gencon/019,03141.cfm

"The proposed changes will make the system complex, murky, and
expensive, with a degradation rather than an improvement in the
quality of the information available to investors"
http://www.cei.org/gencon/019,03141.cfm

For a 25 page article arguing against expensing options, see "The
Stock Options Controversy And The New Economy"
by James V. DeLong  June 11, 2002 [ pdf format, Abobe Acrobat
required]
http://www.cei.org/pdf/3055.pdf

This article includes numerous arguments, including the suggestion
that "the pressure to change accounting for stock options is motivated
by political rather than accounting concerns" (p. 24).

search strategy: "stock options", "how to value", buffett, "valuation
models"

I hope this helps.

Fantastic!   Thank you.