Formerly About Advanced Micro Devices Message Board

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Politics : Formerly About Advanced Micro Devices

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To: Ali Chen who wrote (72832)	9/23/1999 2:16:00 PM
From: Burt Masnick	Read Replies (2) of 1571800

Ali - Thanks for the URLs. Interesting how much trouble Merck is in. and Microsoft. and Bank America. and Bristol Meyers Squib and Coca Cola and Cisco and Chase Manhatten and Dell and Computer Associates and Eli Lilly and Gillete and Merrill Lynch and Oracle and Schlumberger and Monsanto and Texas Instruments and Sun and Walt Disney and Unocal and Warner-Lambert and .... The problem is lies in several dimensions and is relatively complex which is why there hasn't been a clean formula to come up with valuation and accounting standards. But basically the article is a little disingenuous in that the tables assume what would happen if everything were made "current" in a single year when one factor is that the issue is spread over several years. For another many employees leave before the option awarding period is over and don't get the entirety of the option. Overlooks the issue of the fact that no dividends are paid on company stock. Did mention that AMD periodically reprices it's options downward though. Doesn't mention the fact that at the original prices the options were repeatedly effectively worthless. Isn't that special. It's an accounting issue and it leads to a modest overstatement of earnings for most of the companies mentioned. Glad you pointed it out though. Thanks again for the URLs. There is a proposed accounting rule change starting Jan 1 of next year that would charge company earnings immediately for the cost of the options awarded and that would have an immediate effect of reducing the earnings of growth companies. There is considerable debate over that accounting rule and it remains to be seen whether it will be put into effect. I suspect that if it is you will see statements having to have both the old and new system so that results can be rationally compared. As I said before, this is a highly contentious issue among accountants. In my view, it's somewhat like arguing about religions - sometimes interesting but seldom useful. Regards, Burt

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