America On-Line: will it survive ...? Message Board

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Technology Stocks : America On-Line: will it survive ...?

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To: Kenneth Lu who wrote (570)	11/11/1996 4:31:00 PM
From: Randy Tidd	of 13594

> The big writeoff from assets to expenses is because AOL's > aggressive accounting policy was being flamed by the Wall > Street. I read an article in the WSJ about this accounting snafu over the weekend. What I read really surprised me. I am not an investor in AOL but from what I read, I have no plans on getting anywhere near the stock. AOL's income for the past 5 years looks like this: 1996 to date: $65.2M 1995: $21.4M 1994: $4.1M 1993: $1.7M 1992: $3.6M So unless I'm mistaken, the $390M in deferred "acquisition costs" is a little more than 4 times their combined earnings for the past 5 years. Further, their books don't show this as debt - in financial statements for 6/30/96, they have only $22M in long-term debt. So it looks like, in fact, they would not have shown a profit to date if they had been using a regular cash accounting system. This really bothers me. I'm no expert but I can definitely see how Wall St. would get bent out of shape over this. I can also see how this adds fuel to the "AOL is just a bubble stock" hypothesis especially since this hasn't really come to light until just recently. Does anyone care to share their opinions on this? Randy randy@blacksmith.com

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