Amazon To Expense Options

from the always-a-first dept

Two technology company accounting surprises in a row. First, 3Com decides to drop pro forma earnings reports, and now Amazon has said they’ll start counting stock options as an expense. This has been a huge debate in Silicon Valley, and most tech companies are fighting hard against any proposal that would force the expensing of stock options. While I understand the dilution arguments that people make against the idea of expensing stock options, I also think it’s useful in showing a more accurate picture of a company’s financial position. The news came as part of their latest earnings announcement, which beat expectations. Update: The SJ Merc has an overview of Silicon Valley’s lobbying effort to prevent laws that will require them to expense stock options. Amazon’s move today probably doesn’t help these lobbyists very much.

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Comments on “Amazon To Expense Options”

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Chris (user link) says:

No Subject Given

I don’t think it will really make any difference. The professionals have been, or should have been, factoring them in anyway, and the common folks don’t know how to read a balence sheet. Also, this change won’t affect the cash flow statement at all, right? In my opinion, you learn a lot more about the health of a company by watching the cash. Anybody paying attention to Enron’s cash flow statements would have seen that something was very wrong much earler.

Mike (profile) says:

Re: No Subject Given

Yeah. It shouldn’t effect cash in any way, and anyone looking to understand a business should be looking at their cash flows. Unfortunately, it doesn’t seem that the majority of investors even know what a cash flow statement is (or what a balance sheet is and how it’s different from an income statement – yes, I know it’s scary, but it’s true). Due to the way “earnings releases” are hyped up, people seem to think the only thing to look at is the income statement.

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