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Technology Stocks : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: cfimx who wrote (48464)	4/21/2002 2:46:41 PM
From: Charles Tutt	Read Replies (1) \| Respond to of 64865

R&D isn't always expensed. If you had the patent on a basic technology, wouldn't you consider that an asset (regardless of accounting treatment)? JMHO. Charles Tutt (SM)

To: cfimx who wrote (48464)	4/22/2002 1:45:50 AM
From: Saturn V	Read Replies (1) \| Respond to of 64865

Ref <why do you think r & d is expensed? because its a COST of doing business. its not an asset. technology assets are dubious. if you had technology assets on the books, investors would be even more skeptical. > R & D costs are expensed as incurred. However if you buy technology from someone else, the acquisition costs are depreciated. Given the above tax implications, I have seen some companies indulge in ENRON style transactions. Company A develops a product and delivers a prototype of the product to Company B for $1million (and the cost of development was $0.6million). Company B makes a cosmetic change to the product, and sells it back to Company A for $1.05million dollars. Now legally ,Company A can depreciate the acquisition cost of this new product. Notice that Company A, booked a profit of $0.4 million,and also gets to depreciate the $1.05million over 5-10 years. Hopefully new accounting rules will outlaw such offsetting transactions, and ENRON style accounting.