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To: Oeconomicus who wrote (1861)	10/4/2002 4:50:46 PM
From: MeDroogies	Read Replies (1) \| Respond to of 4345

"AOL tried, a few years ago, to capitalize certain "customer acquisition costs" to be amortized over the typical life of a customer. The idea was that the advertising, CD distribution, sign-up incentives or whatever they were spending money on at the time to get a new subscriber was the cost of acquiring a long-term revenue stream and should be expensed over that same long term. Matching of revenues and associated expenses, right? Wrong, at least according to the SEC. AOL was forced to restate earnings to the tune of a few hundred million dollars, taking a charge to write off these improperly capitalized expenses. " All true. Except that if this were manufacturing, and I bought a robot that increased production while lowering costs, I could cap it. AOL, by their massive marketing, increased revenue and lowered the cost per subscriber (their system scales up very nicely). Same net effect as the manufacturing expense. Different accounting rules. In the end, the writedown benefitted AOL (just as their last one will), because it took tons of costs off the books in one fell swoop. Again, don't take me as a supporter of capping the ad costs......but both sides are legit.