Study Shows Investors Largely Ignoring Options Impact on Accounting in Tech Sector

An October study by Thomas Weisel Partners, an investment banking firm, found that 53% of sell-side analysts use only non-GAAP reporting in their analyses of 50 leading technology companies. All but one of the companies provide non-GAAP statements. The 2006 changes to stock option accounting that required costs to be expensed at grant would show up only in the GAAP report. The report is one more indicator that the accounting reforms are having less impact than was expected when they were implemented. At the time, companies worried that this reporting would be an important investor focus and would significantly hurt their share prices. So far, there is no persuasive evidence that that has happened, and the Weisel report indicates that many investors are not even bothering to look at the information. Ironically, it is still common to hear advisors urging companies to find ways to minimize the apparent impact of equity plans on their income statements, even though there is not much reason to think it has any effect on share prices.