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To: A.L. Reagan who wrote (121754)	7/18/2002 2:24:23 PM
From: cfoe	Respond to of 152472

Some what OT. Regarding all the talk about accounting for options and GAAP in general, I thought the following an interesting example of how following GAAP can actually distort to the downside overall corporate earning. Here goes: Today Sprint announced that it had to lower PCS revenues by some monies due to an FCC ruling effectively putting in limbo fees charged to carriers for completing calls. So here goes my example using $100MM for simplicity. On PCS (i.e., FON) Revenue: ($100MM) (cannot book revenue due to uncertainty of eventual court ruling on whether a contractual right existed) Expenses: $0 (No change) Net income: ($100MM) On books of the other phone company (originator of calls ending on PCS) Revenue: $0 (no change) Expenses: +$100MM (they need to show this as a potential expense for the same reasons Sprint cannot show it as revenue) Net income: ($100MM) (due to the additional expense) So in GAAP terms on a system-wide basis, what should be a wash ($100MM of revenue offset by $100MM of expense) becomes a net loss of $100MM until the court decides whether the fees are owed or not. Complicated enough for all? I wonder how many of these types of situations exist system-wide.