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To: Lizzie Tudor who wrote (10984)	6/27/2002 8:07:07 PM
From: Oeconomicus	Respond to of 11568

This from the NYT previously linked sums up Sullivan's rationale, if you can call it that, fairly well and also offers a historical perspective from the regulated days of telecom. Mr. Sullivan explained that what he had done, according to a person who has been briefed on Mr. Sullivan's explanation, was make a judgment call. He believed that the expenses were an investment in telecommunication line capacity, which would provide increasing revenue in future quarters. Therefore, he reasoned, it was appropriate to defer expenses to future quarters. This does not follow generally accepted accounting principles, according to accounting experts. However, it was a procedure that was used by telecommunications companies before the deregulation of the industry. Under that system, public utility commissions allowed for the creation of models through which expenses of underutilized assets could be deferred in this way. Such rules, however, are not permitted under the current deregulated system, and are not accepted under accounting rules.

To: Lizzie Tudor who wrote (10984)	6/30/2002 11:33:39 PM
From: tejek	Respond to of 11568

Bonehead question for the telco people here - why make operating lease payments in advance of using the lines? Thats kindof contradictory to the terms of an operating lease is it not? Now if this was a finance lease,different story (of course no such thing as a finance lease on phone lines I know) but normally you pay as you go with operating leases I am not an accountant but when you lease an office or industrial bldg. you pay for the upcoming month on the first, or a head of when the space is to be used. Isn't that the same principle in play with these telephone lines? ted