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Technology Stocks : America On-Line: will it survive ...? -- Ignore unavailable to you. Want to Upgrade?

To: Keith J who wrote (7652)	2/11/1998 8:39:00 PM
From: Labrador	Read Replies (3) \| Respond to of 13594

So what will cause AOL to drop ? Can it keep going as Montgomery suggests to $150?

To: Keith J who wrote (7652)	2/12/1998 12:19:00 AM
From: SJSharky	Respond to of 13594

Keith-- High technology accounting is gray in some areas. This is one of them. Theoretically, from a GAAP perspective, you can capitalize product development costs and amortize them over future periods (assuming they provide future benefit). However, the auditors would insist on them being consistent as far as what they capitalize. They must have some finance policy regarding what they capitalize and what they don't. This being said, I can't think of anything other than staff salaries to capitalize as product development costs. Assuming 10 people work on Project X, and Project X is supposed to benefit Y number of quarters, you might be able to argue that you would be able to amortize the salaries over Y periods, the caveat being that you can prove that the items will benefit future periods. I can't think of anything else they would be able to capitalize under "product development" costs. However, since most of my accounting experience is in the semiconductor and software fields, I have limited knowledge on how the internet providers structure their accounting policies. Still monitoring, seeing if I can time my AOL short correctly. For now, glad I am on the sidelines... --Ryan Also found out a bit more about AOL's product development costs. According to the bull in II, AOL expenses product development staff salaries as part of cost of revenues. So, not all of this cost is capitalized. But the last 10-Q did indicate the percentage being capitalized is increasing. Not that I have any idea exactly what it is that they are capitalizing. Anyone have any thoughts on that.