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To: Skeeter Bug who wrote (16390)	8/5/2002 12:46:43 PM
From: Math Junkie	Read Replies (1) \| Respond to of 42834

I agree on the need for consistency. Suppose company "a" (which exists in a universe where they are not allowed to give away stock options) sells the option to the employee and then pays the option price back to the employee as a bonus. That is exactly equivalent to them just giving the stock option to the employee, is it not? Clearly, they have to book the amount as an expense, but they also had to book the same amount as revenue when the employee paid it to them in the first place, so the net effect is zero. Consistency would therefore demand that if you are going to book employee stock options as an expense, then you should also book the same amount as revenue. A while back you said that a company's reduced ability (because of dilution) to raise capital in a secondary offering was a cost to the company. If you are going to count this as an expense, then in order to be consistent, you should also count the money they get in the secondary offering as revenue, no? I also question your premise that the dilution reduces the company's ability to raise capital. Yes, company "a" and company "b" get different amounts of capital from issuing 1,000,000 shares, but that just means that company "b" has to issue a larger number of shares to raise the same capital. The additional expenses from printing and keeping track of the extra shares are minuscule compared to the amount of money being raised. Note that this would also be true if your company "b" had done a stock split in an equivalent amount. So, should stock splits be counted as expenses too? AMAT, for example, refers to their stock splits as "stock dividends." When they do a 2-for-1 split, should they book an expense equal to their entire market capitalization?