House debates stock option bill

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Expense or not

Options are like an expense when they are being used excessively for compensation. Every employee with a wage generates an expense to the company through an administrative salary or a salary that contributes to the cost of goods sold. In theory such options do not match the exact definition of an Expense. But, the function of them is similar to paying your employees a wage.

Financial statements are not really for the benefit of the employees. Rather they are for investores who need to know what is going on. As an investor if my company is banking on paying its employees with my capital gains, I want to be aware of it--right now the notes say it. But by putting it on the income statement the company is to issue options in a responsible manner and the options truly reflect what the company inteded on using them for-wages and salaries.

This garbage about expensing them hurting the bottom line is balonga. If everyone is doing it, all tech companies will be comparable. I might also add that the statement of cash flows is what gives you the true picture. No cash from operations is a signal of bad things to come.

DomB

Posted by: Domb2   Posted on: 07/21/04 You are currently: a Guest | Members login | Terms of Use

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