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To: Mike Van Winkle who wrote (158737)	7/24/2000 9:56:32 AM
From: GVTucker	Read Replies (1) \| Respond to of 176387

RE: Options 'hedging' Gabriel is indeed correct that the proceeds from these type of transactions never see the income statement. Rather, they flow directly through to the equity part of the balance sheet. In addition, there is an effect on the cash flow statement in the form of reduced taxes paid. Some would argue that there are actual accounting reasons for this type of structure (e.g. the net cost of shares repurchased is recorded on the balance sheet in the form of treasury shares). The problem here is that employee options are not recorded as an expense, which I think is a shortcoming of this type of accounting. Ten or twenty years ago, this wasn't much of an issue, because only top managers in the executive suite were compensated with options. Today, it is a significant part of almost every exempt employee's package, and IMO should somehow be expensed as a true salary expense.