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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: BigBull who wrote (296)	2/25/2001 4:52:49 PM
From: upanddown	Respond to of 23153

Welcome, Bull. Soon there isn't going to be anyone left back "there". We need to PM Da Dawg when he gets back. I'll bet he shows up here. Interesting article in this week's Barron's called "Fantasy Accounting" complaining about the difficulty of accurately analyzing the financial health of companies because of recent decisions by the FASB concerning employee options and goodwill. The rulings seem designed to placate corporate managers and prop up earnings and stock prices rather than present an accurate financial picture. Part of the article talks about IRS treatment of exercising stock options. Employee has a tax liability of the difference between the exercise price and the market price and the company gets a tax deduction of the same difference. The article says that five big techs (SUNW MSFT INTC CSCO DELL) got 67% of earnings and 57% of operating cash flow in their most recent reporting periods from tax benefits flowing from employee stock plans but the FASB continues to insist that options are not compensation. The IRS sure doesn't agree. With the recent discussion about the amount of earnings by these same companies attributed to profits on put sales and call purchases on their own stocks, you have to wonder..... Do these companies ever make something and sell it at a profit? Question: when employee options are exercised, does the company use treasury stock for the transaction or some kind of hedging transaction? Can't believe they go out and buy market-priced stock even if the IRS allows it. John