i think it was fasb's 123b that screwed everything up. out of the money options that are granted count as nothing against earnings. but as those options come into the money, earnings take a hit in the amoutnt of the difference between option value and exercise price. the reverse is also true. that is why you see some stocks on a tear and suddenly they have a huge earnings hit. then, the price tanks, and their earnings skyrocket.
stock and in the money options are on the cost side of things.
you often see companies list non-gaap eranings, or adjusted earnings to give a clearer view of the enterprise. the gaap rules tend to disguise a lot, and the subject at hand is a good illustration of it.
this new rule pretty much put an end to those little fast moving roll-ups that used their stock and options as currency.
i am over simplifying.
"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."
(Alexis De Tocqueville)
