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Technology Stocks : Network Associates (NET)
NET 190.27+2.2%9:53 AM EST
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To: Edwarda who wrote (4284)3/15/1999 6:02:00 PM
From: Chuzzlewit  Read Replies (2) of 6021
 
That's why I think cash on cash calculations are best. I wish the analyst community would get behind this idea. It makes a great deal of intuitive sense for people who are not well-versed in accounting and finance, and it makes even more sense for people who are well-versed in finance.

I gather that the current game is to calculate a present value of the cost of completing R&D projects that have been purchased. And then, instead of creating a contra-asset and amortizing the expected annual cost, you simply take it as a one-time restructuring charge. It's amazing that what started off as a conservative accounting practice designed to alert shareholders to coming costs has been perverted by wily CFOs into an earnings enhancement gimmick.

The ultimate idiocy was when some CFOs complained that if the in-process R&D write-off policy were changed it would be harder to do mergers! That's fascinating, because there is no practical effect of these conventions other than hiding what is going on. Taxes don't change, and there is no cash involved (these things are all stock swaps). Yes, it would become harder to do the merger because more investors would see through the flim-flam.

I will relinquish the soap box now.

TTFN,
CTC
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