Britt,
You're welcome. The whole options issue was a very political situation. The Big Six accounting firms initially backed the fair value proposals, but later backed away from it. Without their support, and with the displeasure coming from private industry, the FASB backed away from requiring recognition of the expense to permitting disclosure. The practical effect of this "surrender" is (1)the information will be available only on an annual, as opposed to quarterly, basis (since it will be in the notes to the financial statements, not any press release), and (2)the general public will be unaware of its impacts.
My personal opinion on options is that they are a noncash, recurring expense, and they probably should be included as compensation expense. With the market going up as it has, few people complain, but when the bubble bursts, the effect could be devastating, either from exercises which will force use of cash or permanent earnings dilution. The press surprisingly does not pick up on it at all.
For a quick view of the effect of including option compensation, take a look at Netscape's latest 10-K. A moderate income becomes a large loss. 24 cents vs. (47 cents).
As far as inflation is concerned, I'm no economist, so I don't really have an opinion there.
Regards,
Winston |
