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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Thomas M. who wrote (27986)	5/6/1998 12:00:00 PM
From: Mike M2	Read Replies (1) \| Respond to of 132070

Tom, I have not read the article but the number does seem rather large for MSFT so that could be the case. Look at the footnotes in MSFT and see what numbers they use. I have heard that many tech companies earnings are dramaticly reduced or turn to losses when the true cost of esops are reflected in the income stmt instead hiding on the balance sheet. Bears do not get annual reports I sold my MSFT long ago I told my otherwise very intelligent friend about this matter and he understands accounting but he is in love with MSFT and has done very well-can't argue with success and a greed stricken bull. We both bought CSCO in Jan 91 and he still has his so I look like a fool. Mike

To: Thomas M. who wrote (27986)	5/7/1998 11:44:00 AM
From: Knighty Tin	Respond to of 132070

Tom, Actually, Gretchen didn't do it. It was Smithers from London. And one of the things I disliked about the article was that a discussion of his methodology was absent. The difference between balance sheet and income statement is whether something is an expense or a liability. There is no question that options are replacing salaries and bonuses, both expense items. There is also no doubt that cash deferred compensation is counted as a balance sheet liability for reporting purposes. As far as the IRS goes, it is a liability and the person who gets deferred compensation is an unfunded creditor of the company and the company is not allowed a tax writeoff immediately. Options have the added kicker that they depend upon stock price to determine how much they are worth. So, I look at it sort of like convertible issues. The co. should show diluted and undiluted eps for converts, which may or may not ever be converted. They should also show expensed and unexpensed eps for options that may never be exercised for the stock price on the date of the financial report. After the tax writeoff, which I don't believe Smithers calculated. MB