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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 78.12

-0.4%

3:59 PM EST

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To: Lizzie Tudor who wrote (65520)	5/15/2004 2:40:10 PM
From: rkral	Read Replies (1) of 77400

OT .. Lizzie, re "I think that real world experience is why folks are opposed to BS. If BS gelled with their own experience it would be fine." You say you're a proponent of expensing at exercise .. instead of exercising at grant? Maybe you should reconsider. Over the 34 quarters beginning FY96, expensing the grant day value -- per the Black-Scholes method you dread -- Cisco would have had a cumulative after-tax hit to earnings of $7.2 billion. However, based on the "tax benefit due to option exercise", expensing at exercise -- for those same 34 quarters -- would have been a $13.2 billion hit. You keep claiming the Black-Scholes method overstates compensation expense. Well get this! That *$13.2 billion is an understatement of the exercise date expenses* -- because QSOs, and the use of 83(b) elections on NQSOs, provide no tax benefit to the company. Ron P.S The FASB can't change the rules every time the stock market changes direction.

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