Value Investing Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Bob Rudd who wrote (14046)	2/28/2002 12:23:20 PM
From: Don Earl	Read Replies (2) of 78673

<<<But the accounting rules should be changed so the economic value of those options is reflected as compensation expense on the income statement.>>> I guess I still don't follow the reasoning that options should be treated as basically what amounts to a cash charge against EPS. Options already affect EPS in the form of dilution and taking a second hit on some theoretical pricing model doesn't make sense to me. Capitalizing operating costs to pad the numbers is an accounting issue. Depreciating capital equipment that wears out in 5 years on 10 year basis is an accounting issue. Taking one time charges to pad the numbers backward or forward is an accounting issue. Taking a hit for a non cash item that is already accounted for as dilution to EPS and shareholder equity is not. I think the issue is based more on the abuse of options many of us have seen and lumping any kind of abuse in with accounting abuse. As an owner, or potential owner, in a company's stock, I certainly don't want to see my stock overly diluted. I also don't want to make buying decisions based on fantasy numbers cooked up by accountants. At the same time I can't imagine why anyone would want to see additional charges, which don't cost the company anything, affect the earnings and market value of my holdings any more than it already does in the form of dilution. If options are an accounting issue at all, it would be a matter of more disclosure on when and how they are issued. I'd love to see a table in the quarterly reports showing how many options were issued, to whom, the exercise dates and strikes. Arbitrarily assigning costs to non cash entries is more likely to cause abuse than cure it. How do you treat options that expire out of the money? Count it as income? Do you issue options every quarter? Or take a hit once a year? Or maybe issue them when there is some advantage to be gained by taking the charge? Personally I think we have enough real problems with accounting issues without opening a whole new can of worms.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next