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Technology Stocks : America On-Line: will it survive ...?
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To: Zoltan! who wrote (270)10/11/1996 9:54:00 AM
From: steve lipson   of 13594
 
I don't recall if they also deferred revenue as you're describing. My guess is not.

No, CUC paid more in commission and marketing costs to sign up a member than they received in revenue the first year from that memebership fee. (Does that sound familiar?) They amortized those marketing expenses over three years, thus showing a profit on each new member during the first year, even though the cash flow from that member was negative until late in the second year or even the third year.

If you achieve your growth targets, that kind of aggressive accounting is not a problem.

Miss your targets, as I've said, and you have so many problems the accounting is the least of your worries.

Regards
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