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

To: RetiredNow who wrote (67214)	3/6/2005 10:02:24 AM
From: rkral	Read Replies (1) \| Respond to of 77400

mindmeld, it's not time to jump off the bridge. Expensing options isn't going to increase net net cash flow (CFFO + CFFI + CFFF), but it's not going to decrease it either. It's not even going to shift cash payment of taxes from one reporting period to another. Expensing options will -- as you wrote earlier -- reduce operating income reducing both income taxes and net income. IMO statutory tax rates will be applied to option expense, leaving the effective tax rate relatively unchanged. But that's accrual accounting on the income statement, while cash tax payments remain unchanged. Resolution of accrual accounting and cash accounting in this matter remains a mystery to me. GVTucker can most likely explain it, and perhaps he will chime in here. re "If it is a cost of doing business, then it should be deducted from earnings for SEC reporting purposes and tax purposes, period." But it's "non-cash compensation". If the IRS (and Congress) allow a deduction to the company ... might not they then have justifiable grounds to tax the employees? Employees pocketbooks may be in danger here ... at least those with the losing lottery tickets. Ron

To: RetiredNow who wrote (67214)	3/7/2005 8:38:15 AM
From: GVTucker	Read Replies (4) \| Respond to of 77400

mindmeld, RE: Wow. Now I am beginning to see why tech execs don't want to expense stock options. I think it is completely bogus to force companies to put an expense on the books and then not let them carry that same expense come tax time. If it is a cost of doing business, then it should be deducted from earnings for SEC reporting purposes and tax purposes, period. You're way off base here. Stock options are already expensed come tax time. This has been the case forever. The change in GAAP accounting for stock options won't change the tax books at all. This is the main reason why I am so disgusted with a lot of the anti-expensing lobby. They claim that stock options expense is a phantom expense, that it isn't correct because they can't accurately measure stock options expense. And yet they have been deducting that expense off their taxes for quite a long time. It is why Cisco didn't pay any corporate tax at all in 2000, even though they had billions in net income. The stock option expense that year was huge, and it was deducted off their taxes, even though it didn't affect the earnings reported to the SEC.