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Technology Stocks : Wind River going up, up, up! -- Ignore unavailable to you. Want to Upgrade?

To: Mark Brophy who wrote (4179)	1/30/1999 4:10:00 PM
From: Jerry Asher	Read Replies (2) \| Respond to of 10309

Mark, I understand you disagree with my interpretation. I don't know if my interpretation is correct either. What I said was that nowhere in the SEC speech did the chairman refer to deferring earnings as a means of manipulating earnings. That is why I asked the question I asked. Wouldn't you believe any controversy in deferred revenue recognition would be so familiar to the chairman that he would have mentioned it if he felt it relevant to earnings management problems? The Upside article doesn't mention deferred revenues either. The closest Upside comes is to a supposed prevalent practice of recording sales in one quarter into the previous quarter. But that's the opposite of deferred revenues of course. What I am asking now is if you would point me to other statements, speeches, or opinions from SEC officials, Big 6 CPAs, Peter Lynch, or other known respected sources that discuss the practice of deferring revenue with regards to its legitimate uses vs. its ability to adversely manipulate earnings. Your charge about the "big bath" scam seems off the mark. The SEC Chairman wasn't complaining about taking a one time charge vs. amortizing the charge, but he was complaining about purposefully overestimating the charge involved. He was also speaking about restructuring costs, not costs of acquisitions. (Overestimating acquisition costs was what he referred to as "merger magic", but again you do not seem to be stating that your perusal of the financial statements or other knowledge suggests WIND overstated the amount of "in-process" R&D.) With regards to their accounting for employee stock options: I've read articles pro and con on this. I've read articles claiming that Microsoft has never made a single penny due to their similar treatment of employee stock options. WIND seems to be following the standard treatment of these options. Can you point me to some industry leaders that are treating options differently and in the way you feel they should? WIND appears to be using common industry accounting procedures in accordance with GAAP. Your concerns seem to have some legitimacy but I feel you weaken your argument when you flat out accuse WIND of purposefully engaging in scams when they appear to be engaging in the common and best practices in the industry. Their Big 6 accountant gives them a clean audit statement. I believe you could lend credence to your argument by backing your statements up with your analysis of their financial statements or at the least by pointing us to industry leading companies that treat these accounting issues differently and in the way you would prefer. On the other hand, I do thank you for being direct. It certainly doesn't seem that black and white to me. As the SEC Chairman states: Our accounting principles weren't meant to be a straitjacket. Accountants are wise enough to know they cannot anticipate every business structure, or every new and innovative transaction, so they develop principles that allow for flexibility to adapt to changing circumstances. That's why the highest standards of objectivity, integrity and judgment can't be the exception. They must be the rule. Flexibility in accounting allows it to keep pace with business innovations. I am new to investing and to understanding financial practices. I don't know if deferring revenues in the way this forum reports WIND to do is a good accounting practice or not. I have yet to hear an official statement from WIND that that is what they do or why, and I am not a CPA -- I really do not know the impact of what they do and whether that is industry practice or not. I'm trying to learn. I've been following WIND for sometime, in part because I do have some experience with real-time systems, in part because their CEO spoke to some classes I've attended, in part because they're a local company and in part because I can attend their stockholders meetings in the future. I currently hold about 200 shares. That's why I am asking my questions. Thanks, Jerry