golfinvestor
While I'm not mepci, I couldn't help but respond to your post.
Why hasn't FASB mandated that companies expense income? Because it is handled in the footnotes per FASB.
1).How would you "expense" "income"? Perhaps FASB wasn't the independent regulatory body we thought we had? It is apparent that there are a lot of irregularities that FASB has allowed. Putting something in a "footnote" relegates that item to being of minor importance, after all, aren't all the "major" items on either the Income Statement, Balance Sheet or Statement of Cash Flows? Therefore, if it isn't on one of those three, it must be minor? Ask Enron about that one.
Does a company expense shares when they issue a secondary stock offering? No, because it is handled in the dilution of shares outstanding, just like stock options when they are exercised.
A company does a secondary offering to generate capital. Stock options are an employee expense that the company is trying to claim is not an expense. Different ballgame. If it is not an expense, keep the employee without issuing the option. If the options were prohibited, then the company would have to pay the employee more and count that expense against income. Therefore it should count the cost of exercise against income now as well.
Do you understand why companies report pro forma earnings? Because it gives the investor a window to compare operating earnings without all the extra ordinary items. The GAAP numbers are also reported so what's your beef?
Part of the reason for pro-forma is to show what earnings would have been for the full period if both companies would have been merged for the entire period. Another part appears to also be so that some of the true costs of the merger could be downplayed. It is easier to have earnings look better after "one-time" expenses are removed from consideration.
If any of us tried to keep our personal financial records the same way, we would be profitable all the way to either jail or bankruptcy court, or both.
Stock options and pro forma reporting have been around for years and now your just waking up and sounding the bugle. Please!
Yes they have been around for years, but recent years they have been taken to new levels of greed and misdirection. I believe all shareholders should be concerned that the real bottom line income has gotten so difficult to derive, and when properly arrived at, is so far from what has been reported. Complete, open, honest disclosure made in a way that makes it easy for the average investor to decipher the key numbers is an absolute essential of the free market system, we all should be behind those changes which will best promote these qualities in corporate financial reporting.
I have heard the argument recently (and often) that the companies are reporting exactly as they are required to report. That doesn't wash with me when, in so doing, they serve to use the regulations to hide the true results. A management truly committed to honoring their role as trustee of the owners of a business (the shareholders) will make it clear in the filing that certain entries don't give the entire picture and then would go on to explain why. Look at Berkshire Hathaway's reports for an example of what I mean. There are a lot of good companies and managements that do exactly this. We, as investors in a company, should insist on nothing less.
Timba |
