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To: hueyone who wrote (63403)	3/18/2003 3:10:27 PM
From: Lizzie Tudor	Read Replies (2) \| Respond to of 77400

I'm trying to get you to admit that if options expenses were "real" in the sense that capex or other expenses are, that an unprofitable company would not be a successful IPO candidate. What I keep getting back in return is something like, "the fundamentals of the company are not changed" and other malarky. If some company tried to IPO with 100mm in capex expenses (like some of the internet retailers we had in the 90s)- the street won't touch it. Real expenses in excess of 100mm against a new IPO- LOLOL. Options "expenses" well thats another matter isn't it. If the FASB stipulates another separate line item on the books for options expenses, (which I suspect they will) then it is THE EXACT SAME THING as proforma'ing them out. Because it is a method of allowing the financial types to separate the "type" of "expense" and make a call thereof. It will be amusing if they include options expensing in some other lineitem where real expenses are reported. I doubt they do that.

To: hueyone who wrote (63403)	3/18/2003 3:17:48 PM
From: hueyone	Respond to of 77400

Poor accounting reporting requirements, like we have now, can in some cases influence managers to manage or behave differently than they would if more transparent reporting requirements were required. For example, if a manager believes options are no cost, he does not have to report them, and retail investors are not holding the firm accountable for issuing them no matter how many they issue, he may be prone to issue more stock options than he would if stock options were required to be expensed on the income statement. So while merely changing the reporting requirements from recognizing stock options in a 10K footnote to recognizing stock option expense on the income statement, will not change the underlying economic performance of the firm that has already occurred by one iota, it will, in some cases, influence the underlying economic performance of the firm going forward if the manager changes his stock option policy and behavior as a result of the new reporting requirements. And yes, most financial types do believe stock option compensation is a a real expense. That is why FASB wants to change the reporting requirements to include the expense on the income statement. And if FASB succeeds, the new GAAP numbers will include this stock option expense. Regards, Huey