Employee Stock Options - NQSOs & ISOs Message Board

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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs

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To: hueyone who wrote (14)	6/11/2002 9:44:09 AM
From: Clarksterh	Read Replies (2) of 786

If the company sold the same shares to the public and then used the money to pay workers, it would be an expense under anyone's definition. No, there would be two entries under cash flow and earnings - one for the cash coming in from the sale of stock, and an exactly equal one for the compensation going out. It would effect earnings not at all except that there would be dilution. Denying something is income or expense simply because cash doesn't change hands on one side or both doesn't wash. If your company gives you a new Mercedes Benz tomorrow, try telling the IRS it isn't income. Funny that Steve Jobs had to report that 90 million dollar jet that Apple gave him as income. According to your rationale, he didn't get any cash, so he must he must not have any income. ... First, contrary to what you claim as per your examples, no one here is denying that it is income to the recipient. The question is how the company treats the gift. The answer is that it hits cash flow (and earnings) directly only to the extent that it costs them anything. If Apple got the jet for free and then gave it to Jobs, it would not show up on the cash flow at all except possibly for the indirect effects due to taxes. Hopefully the analogy here is clear enough. Which brings the question to mind again that you and Ron have never answered---Why does the IRS so readily recognize this expense that you and Ron call a phantom expense if it so obviously a phantom expense. I wasn't aware that it was so easy to just make up expenses to the IRS on the company reports. This has been addressed multiple times (I'm sorry you don't understand). It is a form of corporate welfare; a way to give money to a company and as such I think it should be removed. Note that this is in point of fact the one and only way that stock options effect cash flow and once removed the stock options would have absolutely no effect on cash flow. Clark

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