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

To: Don Lloyd who wrote (83203)	8/22/2000 1:44:55 AM
From: Bilow	Read Replies (2) \| Respond to of 132070

Hi Don Lloyd; Re my use of "market values" for stocks. The reason that I've done this is because that is the standard technique that accountants use when translating activities done with stock into accounting. In short, accountants reduce everything to money. If they buy a 640 acre plot and it turns out to have an extremely beautiful songbird nesting in it, they don't add an entry for "bird watching value" into their balance sheet. There is no entry for how pretty the secretaries are or how many floors the buildings have. How many employees believe in God isn't listed, nor is the resume of the CEO part of the accounting values. Accounting is just about numbers, and the units are dollars. All the stuff that happens has to be reduced to dollars. Words, on the other hand, are for press releases. (G) In the event that a stock transaction takes place without there being a free market in the stock (these happen all the time if you work for private firms), the accountants value the stock at the most recent price that an "at arms length" investor paid for it, unless that would be grossly unrealistic. For instance, if a company were private and had paid employees with shares, the shares would be priced at a value equal to what the most recent sale of shares to a venture capitalist had been. If no shares had ever been sold, they might do any of a number of other things. But these complications do not apply to publicly traded companies, except that it is true that options are difficult to value. The only reason stock based compensation plans are almost invariably stock option compensation plans is not because of the incentive nature of options (which can expire worthless, theoretically), but instead, (I believe), because of the tax and SEC accounting advantages of options over straight stock. I doubt that there is a single professional accountant who would hesitate to agree that stock compensation (as opposed to the more complicated issue of stock options compensation) for employees belongs as an expense on a P&L statement. The real argument, in industry, is how much to expense options at, or whether they should be expensed or not. Your position is well beyond the bounds of the accounting profession. -- Carl