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Some one said; "It takes governments 2 years
to write legislation and lawyers (and accountants) 2 min. to create a loop hole
big enough to drive a truck thru."
Good luck and good trading,
Ray Raffurty
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
Steve
Walker
To: <A title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Friday, February 08, 2002 9:50
AM
Subject: [RT] New accounting for stock
options could have negative impact onstock prices
Legislation To Be Unveiled Closing Tax Loophole for Stock
Options > Sens. Carl Levin (D-Mich.) and John McCain (R-Ariz.) soon
willintroduce> legislation that would require companies to report
employee stockoptions> similarly on both tax returns and financial
statements, a Levin> spokeswoman said Feb. 7. In the wake of
major controversy over theEnron> bankruptcy, the legislation is an
attempt to fix what Levin's office> called "a long-festering problem in
how some U.S. corporations usestock> options to avoid paying U.S.
taxes while overestimating earnings." The> legislation would shut
down a loophole that allows companies to taketax> deductions for
the stock options they give their employees without> claiming the
options as an expense on their financial statements. Levin>
spokeswoman Tara Andringa said Levin and McCain plan to unveil
themeasure> sometime the week of Feb. 11.> According to a
summary of the bill from Levin's office, Enronallegedly> used this
loophole to claim stock option deductions totaling almost$600>
million, while not reporting this amount as an expense. "The
companycan> tell Uncle Sam one thing and its shareholders the
opposite," thesummary> said. "That's what Enron did.">
Similar Treatment Key. > The Levin document stressed the bill would not
legislate accounting> standards for stock options or directly require
companies to expensestock> option pay. The analysis said,
however, that companies would haveto> treat stock options on tax
returns "the exact same way they treatthem on> their financial
statements." Under the measure set to be introduced,a>
company's stock option deduction would be limited to the amount of>
compensation expense that the company actually shows on its books.
"The> bill would require companies to tell Uncle Sam and their
stockholdersthe> same thing," the Levin document said. "Enron has
already shown howmuch> damage, if not corrected, the existing stock
option double standardcan> inflict on company bookkeeping, investor
confidence, and taxfairness."> Industry Opposition. >
Industries that rely heavily on stock options as compensation
andemployee> incentives, such as software and technology firms, are
likely to> vigorously oppose the legislation. Mark Nebergall,
director of the> Software Finance & Tax Executives Council
(SoFTEC), said there is no> reason to tie the tax treatment of the
options to their accounting> treatment. "There is no good way to
value them at the time ofissue," he> said. "There's no cash leaving
the company at that point. How do you> expense that?" Nebergall
said the Levin/McCain bill would allow acompany> to take tax
deductions only for the amount it expensed in the yearof> issue. If
the exercise of the option was greater than the amount> originally
expensed, no further deduction would be available. Thiswould>
make the offering of stock options-vital currency in the software>
industry-more expensive, Nebergall said. "This Enron fiasco is
beingused> as an opportunity to correct a host of ills that have
nothing to dowith> Enron," he added.> To
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