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Technology Stocks : Network Associates (NET)
NET 197.20-1.4%Dec 1 3:59 PM EST
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To: The Rancher who wrote (4182)2/5/1999 8:45:00 PM
From: Chuzzlewit  Read Replies (1) of 6021
 
Rancher, who has accused NETA of cooking the books? The issue, as far as I'm concerned, has little to do with the controversy regarding the accounting for acquired in-process R&D costs; it has to do with a fair accounting of how companies account for themselves following mergers. Unfortunately, the fictions propagated by pooling of interest accounting preclude shareholders from understanding the benefits to them of these mergers -- and this has nothing to do with issues the SEC is questioning. For example, suppose you have an acquiring company with a cash flow per share exchanging 1 of its shares for 2 of an acquired company and that the former has 100MM shares outstanding and the latter has 20MM shares outstanding. After the deal is done the 10-Q will show 140 MM shares outstanding, but will not indicate what the benefit to the shareholder was of issuing those additional 40MM shares because the fiction of pooling of interests treats the companies as if they were always merged!

Sure, the merged company grows its total revenues and cash flows, but how has the individual shareholder fared? Where in the accounting is the real return per original share calculated?

The sooner we are done with pooling of interest accounting the better. It provides too big a rug under which to sweep financial garbage.

TTFN,
CTC
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