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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Mike M2 who wrote (82762)	8/8/2000 3:14:55 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 132070

Mike - [...it is my understanding that the tax benefit does hit the income statement but I could be wrong - not likely though -g-. ...] interactive.wsj.com "...Who would not embrace a corporate strategy that rewards employees without costing a corporation any cash, and eventually provides the company a whopping tax deduction besides? The most common type of stock option permits companies to deduct the value of options when an employee exercises them. At the same time the employee pays ordinary income tax on the same value. Neither one of these tax transactions shows up in a company's financial reporting of earnings, except as a note in the cash-flow report..." Not conclusive, however. Regards, Don

To: Mike M2 who wrote (82762)	8/8/2000 5:43:03 PM
From: Logain Ablar	Read Replies (1) \| Respond to of 132070

Bill: Unless its changed from about 5 years ago (quite possible since FASB & AICPA have been working in this area) the GAAP reporting of any option related tax went to the balance sheet (capital & surplus) versus the income statement. An example when the non qualified stock option issued @ 10 and exercised @ 30 gives the company a tax return salary expenses of 20 and a tax benefit of $7. The tax return presentation of the expense never goes to the income statement (its just an increase in cash and surplus) and companies are required to record (the old matching principal) the tax benefit in surplus as well. Now to confuse the issue I see companies excluding the payroll tax from their pro forma earnings so I'm assuming for GAAP the payroll tax is reported as an expense on the income statement. The medicare component is 1.45% (on unlimited wage base) and FICA is 6.2% (not sure of this years limits off the top of my head, 68 or 72k by now). Tim