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To: Rosemary who wrote (34409)	3/15/1998 1:16:00 PM
From: Lee	Respond to of 176387

Rosemary, *Off Topic* Another important point in WB's letter is the discussion of using company stock for acquisitions. Specifically, the following: Indeed, their reported costs (but not their true ones) will rise after they are bought by Berkshire if the acquiree has been granting options as part of its compensation packages. In these cases, "earnings" of the acquiree have been overstated because they have followed the standard -- but, in our view, dead wrong -- accounting practice of ignoring the cost to a business of issuing options. When Berkshire acquires an option-issuing company, we promptly substitute a cash compensation plan having an economic value equivalent to that of the previous option plan. The acquiree's true compensation cost is thereby brought out of the closet and charged, as it should be, against earnings. Pretty important point I think. One that I hadn't given much thought before but wondered about some of these mergers lately where they just authorize and issue more common to use for trading. Does any recent company come to mind? Lee