Bux,
Think like a CFO.
Why confuse the account balance?
Answer: Because it is confused.
Is this a ridiculous statement? No, because the company in the last published report stated that they would be taking a charge to more accurately reflect licensing revenues.
At the point when they take this charge, it would be appropriate to take the current line item and modify it accordingly, but not before then.
Additionally, there is the issue of "Materiality." Q1 this item was so insignificant as to not even warrant reporting, so, it was bundled in a single item. By Q3 of 1999, it started to become material, and was mentioned in the Mgmt discussion. It was not mentioned in the annual figure, again, because it was "Not material."
In the Q1 report, the amount was material and was highlighted as a growth item, and mentioned, for good effect as a significant portion of the items.
By Q2, I'll bet they will indeed have a separation of these items. Couldn't do it now because its unclear what the charge will be, per the report.
This analysis, by the way, highlights the distinction between analysts and accountants. You are looking at the numbers as an "Analyst," not as an "Accountant."
One final point, for a more detailed review on the methodology employed in evaluating these figures, I'd suggest a brief review of Graham and Dodds, Security Analysis, p. 156 -158, p 162 - 163, for key highlights. |
