Carl -
[...The purpose of P&L statements is to estimate how well a company is returning profit to the shareholders, not to give an estimate of "the total company value."...]
Unless you differentiate between 'P&L statements' and 'earnings reports', the shareholder dilution, which I have been claiming is the only appropriate place for the option effects to occur, DOES migrate into the P&L by reducing the diluted EPS. However, I expect that you would successfully argue that the result is only approximately correct if the actual earnings are large compared to an actual expense (if it exists) because the dilution can only make a percentage reduction in earnings, and cannot make a subtraction that turns gains into losses. It all seems to come back/down to the question as to 'what is a real expense?'.
I think that you would agree that a company with a plant on the face of the moon need not include an expense for a lunar communications relay satellite just because it would need one if things were different, i.e. the plant were located on the far side of the moon, or the moon could lose its gravitational lock to the Earth.
If the founder of a company owns the land the company sits on, and for his own reasons allows the company to remain rent-free, does the company still need to list a rent/lease expense?
Regards, Don |
