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To: Boca_PETE who wrote (14770)	7/14/2001 3:46:05 PM
From: Skeeter Bug	Read Replies (3) \| Respond to of 42834

>>Skeeter, would you accept a company stock option in lieu of payment for something I buy from you?<< if it was all i could reasonably get, then yes. as i recall, idid was paying this bill in this manner. i do think it was actual stock and not options. but let me ask you this. should stock payment be accounted for differently than an option payment struck at 1/10,000 of a cent? you would have us believe these transactions are entirely different while i maintain they are much more similar than different. the bottom line is this. you can have two companies with identical balance sheets at the beginning of a period and at the end of the period. they sold the same product, for the same price and in the same quantity during that period. however, one company used options (and bought them back to negate the dilution) to compensate their employees and the other used cash. warren buffett understands the absurdity of having these two companies report drastically different income statements when, in the big picture, they operated EXACTLY the same way. a model that doesn't model well is not a good a model, imho. i'm led to believe that the illusion created by these gimmicks, what you called a "bonanza," has blinded you from the big picture - accounting is supposed to give you an idea of how a business operated during a period of time. two companies that operate identical should not have drastically different results b/c of a loophole. that w/b like saying saying a guy that hired someone to kill an enemy didn't commit murder and could walk away free. but hey, i don't know many folks that would turn their back on a "bonanza" ;-) >>The rational behind the internal revenue code is to raise taxes, to cover the costs of government, and to redistribute the taxes in a way that politicians think will get them votes in the next election. Sorry - The code has nothing to do with logic, integrity, consistency and honesty.<< pete, i am totally on board with you here. you see this angle of the loophole. i also agree that the probability of changing the status quo is around nil. csco can afford to spend a lot dough lobbying congress because they don't pay any income tax. think about that next time you send in your fed'l income tax money. you are paying for csco. all of it. one solution would be to eliminate the options deductions unless companies ran it through the income statement as a legitimate expense. in addition, any shares bought back to offset options dilution (minus money received from the employee) could be counted as an expense and run down the income statement. there are solutions to improve the model so that the two companies that operated identical above reported very similar results. however, the "bonanza" would come to a screeching halt. as you are well aware, there is a lot of pressure not to end the gravy train that allows a company to report misleading numbers. ;-)