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Technology Stocks : Booking Holdings (formerly Priceline) -- Ignore unavailable to you. Want to Upgrade?

To: Victor Lazlo who wrote (2054)	12/7/1999 12:38:00 PM
From: H James Morris	Read Replies (2) \| Respond to of 2743

Victor, this is out of yesterdays WSJ. Several months ago I compared Pcln to Ptvl. I choose Ptvl. Compare their charts, and I think you'll see that I did the right thing. Look for the Pcln market cap to get a haircut next year. <<SEC Lists Revenue-Booking Guidelines, Says It Aims to Curb 'Dot-Com' Abuses By ELIZABETH MACDONALD Staff Reporter of THE WALL STREET JOURNAL The Securities and Exchange Commission, in a move that likely will be hotly debated on Wall Street, issued new accounting guidelines intended to attack abuses in the way companies book their revenue. Revenue is the biggest figure on financial statements but is governed by very few accounting rules. Revenue recognition has become a hot topic in recent months, particularly with Internet companies. The SEC says "dot-com" companies have increasingly created clever ways to pump up their revenue with questionable items, such as booking as revenue the entire sale price for a product or service, when all they are really entitled to is a commission on the sale. The new guidelines say if Internet companies merely act as "an agent" for a sale, they must only book the commission fee as revenue. They also stipulate that companies can book revenue if they have satisfied all of these criteria: They have an agreement to deliver products or services; they have actually delivered the products or services; they have fixed a price for the products or services; and they can collect the specified price. While the guideline also reiterates existing standards, the SEC for the first time has knit together disparate revenue-accounting rules together into one package, making it easier to crack down on abusive companies, said Lynn Turner, SEC chief accountant. Having revenue-accounting rules all over the map allowed companies to take advantage of this disarray. "If companies continue to follow abusive practices, we will use the guidelines to focus on them and take appropriate action," Mr. Turner said. Historically, revenue scams have lacked subtlety. For example, now-defunct disk-drive maker MiniScribe Corp. of Longmont, Colo., in 1989 allegedly perpetrated one of the most notorious scams by booking revenue for bricks boxed as disk drives. In recent years, falsifying revenue has increasingly become the accounting scam of choice, the SEC says. The new guidelines come nine months after a study by accounting-organization officials showed half of all SEC accounting-fraud cases from 1987 to 1997 involved revenue hoaxes. The new guideline is designed to "get at those abuses and prevent them in the future," Mr. Turner said. CyberGuard Corp., a network-security company in Fort Lauderdale, Fla., is facing its own problems with revenue recognition, according to a shareholder class-action suit filed in the U.S. District Court for the Southern District of Florida, between October 1997 and August 1998. "The company had revenue-recognition problems due to the misapplication of generally accepted accounting principles," said Terrence Zielinski, CyberGuard's chief financial officer. One popular Internet company, Priceline.com Inc. of Stamford, Conn., isn't concerned about the crackdown. The Stamford, Conn., electronic retailer is best known for allowing consumers to name their own price for airline tickets, hotel rooms and rental cars. In the case of airline tickets, Priceline recognizes as revenue the entire dollar figure of ticket sales. Traditional travel agencies, in contrast, typically book as revenue only the commission they make on ticket sales. Because it actually buys the tickets and instantaneously resells them to customers, Priceline thus absorbs the revenue risk if a buyer rescinds. That is part of what qualifies the company as the merchant of record for ticket sales, not a mere middleman, the company says. Priceline said it was prepared to change its accounting methods if requested to do so by regulators. "We don't care if people ask us to do it differently," said Paul Francis, Priceline's chief financial officer. "We think investors clearly understand how we account for revenues."