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To: Stock Farmer who wrote (28932)	2/19/2003 4:38:06 AM
From: Maurice Winn	Read Replies (1) \| Respond to of 74559

<It's the nature of the activity that determines whether or not the resulting cost is an expense. And compensation is an expense activity. This is what the FASB is saying too.> John, compensation using Q would be so cool. Imagine not expensing that. Salaries and wages would go to zero. So would rent, power, insurance, parts and everything else. All revenue would be in US$ for GAAP purposes and all expenses in Q which would not appear as expenses. So all revenue would be profit. Thanks for pointing that out. It's a great way to really make the company super profitable. Yay for Q. It's much better than payment in gold, which doesn't travel through cyberspace very well. Mqurice

To: Stock Farmer who wrote (28932)	2/19/2003 5:18:48 AM
From: Don Lloyd	Read Replies (2) \| Respond to of 74559

John, It's not the stock that's the expense here. I was quite clear that the COMPENSATION is an expense. Not the Stock itself. The problem is not calling the COMPENSATION an expense, it is quantifying it. The expense has to be tied to a transfer medium. With the company's own stock, the expense is effectively zero. You didn't address my question about whether a company's own stock is an asset or not. If the company, instead of giving shares to an employee, takes shares out of the company vault and burns them, has it suffered a loss in the process? What if it gives the shares to the next ten people who walk by the company's front door? The problem with expensing stock grants is that it double counts the degree of injury to the existing stockholders. If something is an expense to the company, it must reduce the value of the company below what it would otherwise be. This decrease in value must impact the shareholders. But they are also impacted by the dilution in their share of the total company that they own. You can't have both injuries and properly reflect the reality of shareholder value. If I tell you that the President of a company has 1M shares that he didn't pay for, and that's all that I tell you, you have no way of distinguishing whether the shares are the result of direct company compensation or the result of a stock split which is followed by the shareholders personally giving their split shares to the President themselves. In both cases the company, the President, and the shareholders all end up in EXACTLY the same condition. There can be no logic that allows only one of the two possible sequences that end in the same place to be an expense. Regards, Don