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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: geode00 who wrote (16435)8/8/2002 11:52:10 PM
From: Don Lloyd   of 42834
 
geode00,

Seems like there are good arguments on both sides. However, I like the one that says the tax return should be the financial statement. I like it because it seems logical although I have no idea how that would work in practice as no group of accountants can ever come up with the same tax-owed on an individual's return much less that of a corporation.

The tax return won't fly because the only cost is to the shareholders, and the deduction of their cost can only be done through the company's tax return unless you were to decide that every time any employee accepted an option grant or exercised an option, then every single shareholder would experience a reverse taxable event. The income statement and the tax return must remain separate, if for no other reason than two arbitrary documents can never be compatible.

If these aren't options but outright stock grants that are held in the treasury as assets, the argument for expensing them seems much cleaner.

Just the opposite. Stock held by the company is NOT an economic asset, as it has no scarcity value at all and has all the significance of writing an IOU or a check to yourself. (or being a treasury security held by the SS Trust Fund)

At any rate, it seems there will be some companies who do and some who don't. The do's being those who don't give out that many and the dont's being those who give out a lot.

This is likely true, as expensing options doesn't mean too much to a company whose employees know that the only valuable thing to do with company stock is to sell it short.

Regards, Don
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