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

To: rkral who wrote (64746)	9/19/2003 11:32:06 AM
From: Boca_PETE	Read Replies (1) \| Respond to of 77400

rkral: re: ("the common denominator in your inability to reason with John Shannon, GVTucker, PerryA, hueyone, and me.") The common denominator seems to me to be the absence of any convincing argument refuting the two main premise upon which my view that the granting of employee stock options is solely a capital transaction as treated in APB 25. Message 19322261 Thanks for the stimulating debate. We shall know how this turns out over time. Regards P

To: rkral who wrote (64746)	9/19/2003 11:38:04 AM
From: Kirk ©	Read Replies (2) \| Respond to of 77400

You make a great argument for why stock compensation that vests immediately should be expensed immediately. It is irrelevant to the case of issuing an option that expires worthless. Please show a table how you would account for this. <Pre> End of Year You Employee Others 0 50.0 0.0% 50.0% 1 25.0 50.0 25.0 2 12.5 75.0 12.5 3 6.3 87.5 6.3 becomes: End of Year You Employee Others 0 50.0 0.0% 50.0% 1 50.0 0.0% 50.0% 2 50.0 0.0% 50.0% 3 50.0 0.0% 50.0% for no change now show us how options that expire worthless but are expensed at $1MM would change this table: End Begin End Year Expense Net Income Shares Shares EPS 1 $1MM ($1MM) 2MM 4MM ($0.500) 2 $1MM ($1MM) 4MM 8MM ($0.250) 3 $1MM ($1MM) 8MM 16MM ($0.125) Your answer should show a company that is losing money and all that really happened was it issued some worthless paper to its employees that got them to work hard and probably prevented the losses reported from being larger. The way I read it, people are saying there is an "opportunity cost" lost from giving the option to an employee vs selling it on the open market. This is true. I just don't agree on how you value it or want to account for it. Figure out a better method and I'll agree to expensing. Do you want your company to go into the busines of selling options or encouraging employees to increase shareholder value at a REASONABLE cost?