Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: Axel Gunderson who wrote (607)	8/10/1998 8:10:00 PM
From: Freedom Fighter	Read Replies (1) of 1722

Fleckenstein on tech accounting: SEC probes tech stock earnings... Another factor contributing to the weakness in tech stocks (besides the deteriorating fundamentals) can be found in an article that discussed the heightened scrutiny that they are facing from the SEC. The problem is the tendency of these firms to inflate future earnings by overestimating early stage research that is attained through acquisitions. The SEC is investigating large, one-time research and development write-offs, which tend to get taken when companies acquire other companies. They then try to attribute the purchase price to process research and development, which creates bigger up-front expenses, lowering expenses down the road. Tech stocks may have dipped today as a result of the SEC probe into this widely abused practice. Regardless, readers should know that tech land is still just an accident waiting to happen.

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