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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Stock Farmer who wrote (62826)	1/30/2003 4:27:22 PM
From: GVTucker	Respond to of 77400

However, the distribution of shareholder equity within the three major accounts (retained earnings, paid in capital, other) will change. I suspect what must happen is that since assets are unchanged you would see a reduction in "retained earnings" and an increase in "paid in capital", as if the employee had been paid a wage in cash and then invested this cash directly back into the company. That's my understanding, too.

To: Stock Farmer who wrote (62826)	1/31/2003 1:05:38 PM
From: rkral	Read Replies (1) \| Respond to of 77400

OT .. John, re "I suspect what must happen is that since assets are unchanged you would see a reduction in "retained earnings" and an increase in "paid in capital", as if the employee had been paid a wage in cash and then invested this cash directly back into the company." Exactly. A stock grant is, anon, both an operating activity and a financing activity. The same is true of a stock option grant, IMHO. From BA's FY2001 10-k, sec.gov, we see BA adds $378MM Share-based Plans to Net Earnings in Operating Cash Flow to "reconcile" Net Earnings, and this $378MM ends up in Paid-in Capital, just like Huey's detailed description says. But this $378MM is the Share-based Compensation flowing back, i.e., from the employee to the company, to pay for the stock. Don't you agree this flowback should actually be a component of Financing Cash Flow? Any theories why it isn't? Ron