The key issue with options is that they potentially (they have to be worth exercising) impact the shareholders, but they don’t financially impact the company other than the relatively trivial amount of money they get when the options are exercised. GAAP requirements that one expense the options add to the confusion.
Thanks tamhas, I was wondering when someone would point out the obvious. Stock options (if exercised) dilute the shares, and thus reduce earnings per share, but giving out stock options doesn’t cost the company anything, not a penny, and GAAP’s insistence that they be expensed as an imaginary non-cash expense, is just those obsessively righteous accountants saying “We’ll punish those naughty boys who give stock options by making believe it’s an expense as well as a dilution”, which is why no-one pays attention to GAAP results except the SEC, and everyone else uses adjusted results, including the CFO’s in the conference calls, the CEO’s in analyzing the business progress, and the analysts.
JMHO
Saul