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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.32

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1:22 PM EST

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To: RetiredNow who wrote (67214)	3/6/2005 10:02:24 AM
From: rkral	Read Replies (1) of 77400

mindmeld, it's not time to jump off the bridge. Expensing options isn't going to increase net net cash flow (CFFO + CFFI + CFFF), but it's not going to decrease it either. It's not even going to shift cash payment of taxes from one reporting period to another. Expensing options will -- as you wrote earlier -- reduce operating income reducing both income taxes and net income. IMO statutory tax rates will be applied to option expense, leaving the effective tax rate relatively unchanged. But that's accrual accounting on the income statement, while cash tax payments remain unchanged. Resolution of accrual accounting and cash accounting in this matter remains a mystery to me. GVTucker can most likely explain it, and perhaps he will chime in here. re "If it is a cost of doing business, then it should be deducted from earnings for SEC reporting purposes and tax purposes, period." But it's "non-cash compensation". If the IRS (and Congress) allow a deduction to the company ... might not they then have justifiable grounds to tax the employees? Employees pocketbooks may be in danger here ... at least those with the losing lottery tickets. Ron

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