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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Wizard who wrote (8635)	6/24/1998 4:09:00 PM
From: Reginald Middleton	Read Replies (1) \| Respond to of 74651

<Its bean counting and adjusting so that the matching principle applies. Lots of assumptions in accrual accounting but nearly all of the assumptions make sense in theory. In practice, the income statement gets tweaked but its not useless.> I stand by my "extreme" statement. Most investors don't invest in theory, therefore the theoretical validity of accrual accounting means very little. An example of how useless accrual accounting is in terms of economic valuation is to compare the difference in market values and accounting book values of many assets carried on the balance sheet (you mentioned income statement when the ambiguities are throughout the entire reported statement). The differences can be significant. Unless you are selling your stock to an accounting firm, it is best to adhere to the market value in lieu of the book value as described by accrual accounting measures. Consider the difference in actual money available to equity investors as compared to the number on the net income to common line item. This is the reason why the people who by entire companies for a living capitialize cash flows or do comparable company analyses, yet only perform capitalized earnings analysis for cos. management presentation. Do you know of any M&A banks who rely on earnings to guage the actual value of a company?