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Politics : Ask Michael Burke
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To: Sanjay Mazumdar who wrote (87647)12/28/2000 11:44:15 AM
From: accountclosed  Read Replies (2) of 132070
 
somehow they are identifying material that they are selling. i am not familiar with the company, however, i can speculate...

1. they sell materials with their service, such as manuals, computer hardware, etc. the above argued inventory appreciation would apply to those materials.

2. they are inventorying "work in progress". in most situations, labor is identified as an overhead item rather than a cost of goods sold item. however, these people might be packeting labor as the cost of what they are selling. to have a negative cost of goods sold in this situation, they might have had to write up the value of this work in progress labor, i.e. they are now considering it of more value than they valued that work in progress at the end of the previous period.

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i guess questions arise for the investor of whether they agree with the accounting method being used (i have no knowledge of this company's biz) and whether the particular accounting practice represents a sustainable and valid income stream.
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