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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs -- Ignore unavailable to you. Want to Upgrade?

To: Clarksterh who wrote (45)	6/14/2002 2:33:05 PM
From: hueyone	Read Replies (2) \| Respond to of 786

Show me a company donating newly issued stock and writing it off from earnings. Companies are already writing off the value of shares connected with stock options when they report net income to the IRS. my only complaint is that there is no accounting for stock options. As you well know, this is untrue. It is well accounted for under diluted earnings. Sorry, all the diluted earnings does is divide misstated earnings by additional shares to arrive at a misstated EPS. Please show me where a diluted EPS takes into account the differernce between strike price and market price, the cost? Do you now contend that the strike price at which stock options are issued is irrelevant? And that the value of the shares is irrelevant? Come on Clark, let's get real. Eventually all skeletons work their way out of the closet; this scam (practiced disproportionately by tech companies) being perpetrated on public investors----lack of accounting for stock options, will eventually see the light of day. Hopefully, you can cash your stock options in before it happens, but with Standard and Poors set to knock the first pin down in the near future with their Core Earnings reports, you better hurry. Best, Huey

To: Clarksterh who wrote (45)	6/18/2002 9:50:03 AM
From: Stock Farmer	Respond to of 786

To paraphrase from a book on GAAP that I looked at yesterday - 'The difference between the statement of cash flow and the statement of earnings is timing and only timing. Over time the two should end up the same.' Obviously cash flow is about cash (none of which is flowing in a stock option plan), and thus earnings should also be about the same albeit with different timing. LOL... this is bull$hit Clark. As posted over on the QCOM thread. I suggest you don't paraphrase, but quote whatever book that was directly. The difference between the two statements is that one is a statement of changes to the cash account, and the other details net changes to shareholder equity. When assets grow or decrease, resulting in a net change to shareholder equity, then an entry appears income statement. When one asset is exchanged for another, there is no net change to equity and nothing appears on the income statement. When one of these assets is cash, then there is a cash flow and something appears on the cash flow statement. Nothing to do with timing. We can have change in equity without change in cash (asset depreciation), and change in cash without change in equity (CAPEX). Where it gets really neat is when we use non cash assets (e.g. stock) to acquire assets which then depreciate. In this case we end up with no change to earning or cash flow on acquisition, a charge to earnings as the asset depreciates, with a corresponding adjustment to cash flows to account for the non-cash nature of the charge. Stock options would be accounted exactly the same way Clark. A charge to earnings (similar to depreciation) and an adjustment to cash flow (similar to depreciation). No prior charge to cash flow (similar to stock purchase of capital equipment). The asset "paid in capital" would change appropriately. Not unlike that strange non-cash asset Goodwill which never appears ever in the cash flow statement but always gets written down on earnings and adjusted back in cash flows. You may be an expert in broadband satellite telecommunications Clark. But you have a lot to learn about corporate finance. John