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To: Don Lloyd who wrote (54)	12/12/2001 5:22:12 AM
From: LLCF	Read Replies (1) \| Respond to of 445

<The overriding issue is that if a dollar denominated expense for option compensation IS entered on the income statement AND the diluted share count IS increased for outstanding options as per current practice, the reported diluted EPS will be too low. > I didn't know this was the overriding issue, I thought it was what made sense. I believe an accountant could figure out how to do it correctly fairly easily although as you point out it would have to also change the current practice on the balance sheet as well. I see no reason why you couldn't have a non-cash expense ledger offset elsewhere that moves depending on the value of the options... the same should occur in the capital accounts reflecting the dilution. Currently the capital accounts don't reflect the "delta" of the options outstanding, they just 'fully dilute' or not. Let's face it, to dilute properly you have to have an options schedule anyway with strike prices and expiration dates. When you issue an option in return for services it should affect cost of goods sold and the capital accounts no? DAK