To: Phil Jacobson who wrote (9174 ) 9/30/1998 12:28:00 AM From: milesofstyles Respond to
a good point, phil, regarding the goodwill. but that is easily adjusted for by removing it from the books and recalculating your ratios.most analysts will do this. the asset/expense hocus pocus accounting is much less detectable, if at all once the auditors sign off on the books.what has been occurring is management of a company will ask itself in certain instances whether it is more beneficial to the company to allocate an item purchased or expense it out all at once. this decision will affect the ratios and is based on financial position. if the auditors do not see a red flag when examining the detail behind the accounts for a huge expense that should have been allocated, or seemingly moreso choose to ignore it,cuz it should stick out like a sore thumb on the detail level, how in the world are you gonna detect it when reviewing summary data of the expenses via an income statement ? especially if this years expense remains in line with last years, which often the corporate budget will ensure.
