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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.22

+0.1%

Nov 24 3:59 PM EST

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To: RetiredNow who wrote (67207)	3/6/2005 12:06:52 AM
From: rkral	Read Replies (1) of 77400

mindmeld, re "[ed: Expensing options reduces] net income, which means that Cisco will pay less taxes. That means high cashflow. Higher cashflow means a higher valuation." Cisco grants options with an exercise price equal to the market price causing the intrinsic value to be $0. In that case, expensing the options changes neither actual taxes paid nor cash flow. Paragraph 58 of SFAS No. 123R, "Share-Based Payment", reads ... "Income tax regulations specify allowable tax deductions for instruments issued under share-based payment arrangements in determining an entity’s income tax liability. For example, under U.S. tax law at the issuance date of this Statement, allowable tax deductions are generally measured as the intrinsic value of an instrument on a specified date. The time value component, if any, of the fair value of an instrument generally is not tax deductible. Therefore, tax deductions generally will arise in different amounts and in different periods from compensation cost recognized in financial statements." fasb.org Ron

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