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To: Saturn V who wrote (179966)	12/20/2004 6:37:29 PM
From: The Duke of URL©	Read Replies (3) \| Respond to of 186894

"Why dont FASB just monetize the difference between the undiluted earnings per share and the diluted earnings per share, by multiplying this difference by the number of shares, and describe that as the option expense ?" B E C A U S E :) You are double deducting it. When the company issues an option or even the stock itself THE COMPANY EARNINGS DON'T CHANGE A PENNY. What changes is EPS because you now have more stock dividing the exact same amount of earnings. It is in effect a gift by the outstanding shareholders of part of their ownership rights in the future income of the company to employees for working hard. The earnings to the penny are the same both the day before and the day after the gift at the company level. It is just that now more people are extant to divide the same earnings. This has been known for the last 70 years by sofisticated investors and analysts but is only recently being discovered by the accounting community.