Crazy accountants? Yeah, wild and crazy bean counters. Sure.
Actually Steve, a deferred charge is an asset - an intangible one. I guess, theoretically, any truly depreciating asset is just a deferred cost. However, in the wild and crazy world of accounting, any tangible fixed assets owned and used/to be used in the business (i.e. not simply an asset held for resale or for investment purposes) could not be shown as "deferred charges". Why would you want to anyway? So that investors and lenders would underestimate your tangible assets?
Anyway, prepaid expenses that you may be more accustomed to seeing in current assets are the same thing. The difference is that the benefit and, thus, the amortization comes within one accounting cycle (a year).
To quote Kieso & Weygandt - "deferred charges (long-term prepaid expenses)".
Come to think of it, the deferred charge is likely made up of upfront payments to other Web sites for multi-year deals and/or capitalized loan costs on the $75mm term loan. But, no matter which, it is cash out the door for an INTANGIBLE asset. What's more, if they prepay the bank loan this year, they have to charge of the deferred loan costs immediately.
Finally, NOTE ALSO THAT PREPAID EXPENSES INCREASED BY $1.5 MILLION THIS QUARTER TOO. That's a total of $3.7 million of cash spent last quarter on what will hit expenses this year and next.
Bob |
