Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : GX Investors Thread -- Ignore unavailable to you. Want to Upgrade?

To: Ally who wrote (72)	8/22/2001 9:28:20 AM
From: BWAC	Read Replies (3) \| Respond to of 586

Ally, I simply don't get where you are coming from. It is great to be skeptical in financial matters. Having been an Auditor I have a natural huge overdose of skepticism. But you certainly outdo me. You asked what made up these amounts of "Other Current Liabilities". I showed you the breakdown from the 10K. On that matter that is the best I could do. To me, each individual item looks like a normal recurring operational induced and budgeted accrued expense. Nothing alarming. This deferred revenue thing is not being cast right. And yes I agree spouting 10k language and accounting terms is confusing. I did that to show that there is a rhyme and reason behind the accounting methods GX uses and that those methods are in fact appropriate. You asked to simplify. I can do that as well. 1.) You buy "capacity" to use my network to carry a certain amount for data for a certain amount of time. 10 years. 2.) Payable in cash up front. 3.) I take 100 % of the cash in immediately. Cash Assets increase. 4.) I record Sales for 1/10th of that amount in the current year. Correspondingly I set up a Deferred Revenue Liability for 9/10ths of that contract. 5.) The Deferred Revenue Liability is classified as long term because it is infact long term, ie. 9 years remaining. 6.) As each year passes, a portion of this Deferred Revenue Liability is moved to the Current Liability section. And the Deferred Revenue Liability is reduced. (Please note that this number would not necessarily been seen in aggregate to go down since GX is still making NEW sales of these long term capacity agreements.) 7.) As the Current portion of Deferred Revenue is used by you througout the year, I reduce my Current Liability and and recognize that same amount as Sales. 8.) Why is all this done? Simple. Matching Expenses to the Revenue it Produces. Matching Revenue to the period of time in which it is Earned. 9.) "It looks more like "refundable deposit" of capacity contracts where ownership has not been transferred to purchaser." No. It is the liability of FUTURE SERVICE that GX must provide for the cash recieved in the capacity contract. 10.) "I don't think it should be interpreted as "standard accounting" simplistic apportionment of deferred revenue between a year time frame and longer. " Well? It is standard. And better than standard, it is REQUIRED. ----------------------------------- I don't know what to tell you. Respectfully, I would like to say that you are making a lot of assumptions and statements that infer a serious problem, but each assumption or statement is based upon a general misunderstanding of the accounting requirements and how each number is normally generated. As I said, it is fine to be skeptical; but your skepticism and tone will not allow you to see any explanation. On liquidity, Its a simple thing as well. If GX can cover the debt repayments and interest payments out of cash flow then their is no problem. Although they certainly may have to pull in their capital spending to do so. I don't see it as a real problem. I see it as a fear. And fear rules now. How about putting the gas can down for a while? The fear fire is burning well. It really doesn't need any more fuel.

To: Ally who wrote (72)	8/22/2001 9:33:37 AM
From: HW Bowman	Respond to of 586

Ally, BWAC's Post #65 re: deferred revenue from IRU pre-sales as a pro-rated current liability (an amount for services currently owed to the IRU purchaser) strikes me a a very clear explanation of an issue that has been murky to me for a long time. I don't understand how you might characterize this as merely a refundable deposit in that it is pursuant to a long term contractual obligation. Conceivably there are scenarios where such current monies might be returned to the purchaser as damages in the event of a GX breach of some sort in its obligation to provide current services, but that does not strike me as a refundable deposit. Otherwise any long term contract could be viewed as a series of refundable deposits over the periodic term of that contract.