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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.11

+0.9%

Nov 21 9:30 AM EST

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To: Lizzie Tudor who wrote (67240)	3/7/2005 7:10:05 PM
From: Stock Farmer	Read Replies (2) of 77400

Lizzie, "tax law has nothing to do with anything it seems" Really? The difference between tax law and GAAP is that the standard applied to tax law is "income in fact" and it is constantly being developed and challenged in court. The standard applied to GAAP is far less rigorous. And also serves a different purpose. One important (some might say primary) purpose of GAAP reporting is to reflect the effectiveness of the stewards of our capital - the board and executive of the corporations in which we are shareholders. While they have a fiduciary duty to us as shareholders, they also have interests which are sometimes in conflict (e.g. their own compensation). In resolution, we all have agreed to apply a standard of reporting which presumably gives us all of the information that we need to know to judge them effectively, while also giving them some latitude to innovate and to reap some of the benefits of their innovation. That doesn't mean they are required to explain to us that they are shovelling cash into their pockets faster than we realize. At least not directly. According to our agreement they are merely required to report on the existence of various cash shovels, and the rules and restrictions related to their use. They must also report that the cash shovels are working effectively and within the rules; that the recipients of the cash are, in some cases, related to themselves; that the determination of the amount of cash is (in their opinion) appropriate; that the amount of cash is (in their opinion) indeterminate at this time, but linked tightly to the amount of cash they are successful making us think will be shovelled into our pockets (whether or not that actually comes to pass);... and so on. And they are allowed to stash and shift the cash in and amongst as many piles as they can dream up. Provided that each of the piles is accounted for to the penny, they are doing their job. It's up to shareholders to put two and two and two and two together. Sometimes we demonstrate an amazing collective desire to be and remain ineffectively informed. Apparently we do so in the misplaced belief that allowing our executives to mislead us gives us a better return on our capital. Which for the life of me I can't understand.

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