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To: Amy J who wrote (173060)	2/14/2003 9:04:28 AM
From: GVTucker	Respond to of 186894

Amy, RE: Btw, since public companies grant at fair market value, there is no different outcome. There are many, many instances where public companies issue options at strike prices that are not at current market price. When we issued options, I'm absolutely positive I didn't have to run down to the bank and withdraw cash in order to issue options. Nor did our accountant have to write out a check. There was absolutely no cost. There was no change in our company's bank balance. There was no cost to the company. Only one thing happened: dilution. Dilution is represented in the financial statements. Just because there is no change in your company's bank balance doesn't mean that there is no cost. Depreciation reduces the value of your fixed assets. There is no change to your company's bank balance. Your net income still goes down. If you have obsolete inventory, the value of your inventory goes down. There is no change to your company's bank balance. Your net income still goes down. I could go on forever. There are many, many instances of things that happen that do not entail a cash cost but still reduce net income. GAAP accounting for public companies is based on an accrual system, not cash cost. And companies who issue options to employees are giving those employees something that has a true value. And it is rather hypocritical of companies to claim an expense on their taxes when employees exercise these options and yet not ever claim any expense on their GAAP statements. If these companies truly believe that they are not incurring any expense when they award employees options then they won't mind if the IRS starts to say the same thing.