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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Xpiderman who wrote (47035)	5/17/1998 11:45:00 AM
From: Dennis R. Duke	Read Replies (1) \| Respond to of 61433

OT For the record, I have been a CFO, and am looking to be again. I have never been a CPA. I have always worked in industry and never in public accounting. Option exercises are accounted for in the Balance Sheet only. They also show up in the Statement of Changes in Equity. The entry is Debit cash and credit common stock at par and additional paid-in capital for any difference. Thus, the effect is compensation without a cooresponding expense in the Statement of Income. Yes, it does create dilution, in that additional shares are issues and outstanding. If the dilution is material it should have a corresponding decrease in market share price. A buy-back program, like IBM and others have announced, is usually a signal that the company's management believes their stock is cheap. Such programs are announced to give that message to the street. Often the company does not follow through and buy back the stock. You really don't know on that one until they publish their financial statements. It will show up in the Statement of Changes in Equity, as a reduction in shares outstanding. It will also show up in the Statement of Changes in Cash or Cashflow, as a use of funds. A buy back program could offset the dilutive effects of a options program, but the strategies are different. They are rarely at play at the same company. In most cases a company is either doing one or the other. Compensation without recording an expense and diluting shareholders, or giving the message that their stock is cheap and it's time to buy, and in same cases actually buying the stock. Hope that helps, Dennis