INFORMATION ANALYSIS (IAIC) - YEAR 2000 Date Remediation Message Board

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Technology Stocks : INFORMATION ANALYSIS (IAIC) - YEAR 2000 Date Remediation

IAIC 4.280

+12.3%

Dec 16 4:00 PM EST

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To: RikRichter who wrote (1227)	1/18/1998 6:11:00 PM
From: CalculatedRisk	Read Replies (1) of 2011

Elliot, re: software capitalization and "useful life". It is important to make a distinction between what the auditors consider the "useful life" for a software product based on conservative assumptions versus marketing / technological issues (that you raised). These are very different issues. I sincerely doubt any accountant at Ernst & Young would allow amortization beyond the Year 2000 for a Y2K product. Most software products are amortized over a short period anyway - usually 3 years! This is due to rapid technological changes. It is possible, as you suggest, that a portion of the development costs are for "migration" enhancements. In that case, the auditors would probably allow 3 year amortization for those costs. But all of this discussion misses the core issue. Sophisticated investors just expense the R&D in their evaluation of the Company anyway. As an example, last quarter IAIC reported a loss of $0.11 per share ... the actual loss, with proper adjustments, was $0.35 per share (I just made a quick calculation - but if you are interested I will calculate this for you!). Less sophisticated investors might miss this information - that is why there is strong move to eliminate the practice of capitalizing software development. Regards, Bill

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