Replies to post #146948 on InterDigital Inc (IDCC)

[Corp_Buyer]

DD- I follow your example perfectly. But, as you clearly stated, you are "ignoring the tax impact", which is the key issue it seems to me.

Evidently, this reversal has the effect of crediting management for goal achievement. That much we DO know from the 8K (although I am not sure you agree on this point).

We do both agree, that if this is the case, i.e. if this reversal credits operating goal achievement, then that runs contrary to a properly designed goal incentive plan.

I leave it to you to explain the mechanics of it, and I defer to your accounting expertise.

So, hypothetically, if you were to agree with me for a moment, that this reversal DOES in fact credit goal achievement, can YOU then please explain how that may be, in your view, from a correct accounting perspective, that the application of this reserve by management could possibly credit their operating goal achievement (be it NI, or FCF, or whatever accounting metric may be in use here)?

TIA,
Corp_Buyer

[Corp_Buyer]

DD, the key issue is that this reserve reversal does affect the P&L to SOME EXTENT, in this case, and evidently, the "financial statement" effect in this case has benefitted operating goal achievement, although I agree with you that we are not privy to the specifics (of the metrics used nor the target amounts).

Somehow, we got diverted talking about taxes, "financial statements" vs. tax books, etc. when the key point is that whatever metric(s) management IS using for their operating target(s), these metrics WERE credited as a result of this partial reserve reversal.

The upcoming 2005 results should greatly clarify this entire matter.

The target goals may be FCF, or NI, or some other metric(s), but they were benefitted by this reversal, it seems to me according to the 8K, and that is my concern.

And if this is the case, i.e. that this reserve reversal credits operating goal achievement, then apparently we agree the operating goal plan is NOT properly designed.

MO,
Corp_Buyer