SEC Block’s Cisco Options-Expensing Plan

Good news for investors. Companies will soon be required to expense stock options in their income statements. This will take a huge bite out of earnings, especially at a lot of tech stocks. It’s no wonder that Silicon Valley fought the new regulation very hard. The loudest voice came from Cisco Systems. If it had expensed stock options, Cisco’s earnings would be 18% lower for the first nine months of this fiscal year.

Cisco had a plan to circumvent the new regulation by creating financial contracts that would value employee stock options. The SEC just said that the plan was insufficient. It could have cut the cost of expensing options by 90%.

Posted by on September 12th, 2005 at 2:30 pm


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