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Yahoo! Shareholders Nix Option Expensing

May 17, 2003

SUNNYVALE, Calif. (AP) _ Yahoo! Inc.’s shareholders on Friday rejected a proposal urging the Internet icon to begin expensing employee stock options _ a move that would turn the company’s financial results upside down.

The Sunnyvale-based company said 64 percent of its voting shareholders opposed the expensing proposal. Similar measures have passed nationwide at 18 companies, including two in Silicon Valley _ Apple Computer and Veritas Software.

More than 200 other companies across the country have voluntarily decided to expense options. The rule-setting Financial Accounting Standards Board has indicated it will mandate the change as early as next year.

Like most other high-tech companies, Yahoo doesn’t want to expense options because it believes there is no good way to accurately assess their value.

Under a formula commonly used to estimate the effect of option expensing, Yahoo said it would have lost $440 million last year _ instead of reporting a $42.8 million profit under the current accounting rules that don’t treat options as an expense.

Instead of registering a $46.7 million profit, Yahoo would have lost another $18.5 million during this year’s first quarter if it had to expense options.

In trading on the Nasdaq Stock Market, Yahoo shares rose 24 cents to close at $27.75.

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