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To: Chuzzlewit who wrote (63)	2/2/1999 5:21:00 PM
From: Reginald Middleton	Respond to of 419

<For example, I do not believe that marketing expenses and R&D should be treated as if they were the same. I believe that some portion of cumulative marketing expense goes to building a brand whose effects are lasting, but I also believe that the bulk of advertising is properly treated as an expense of the period.> We are in agreement here. The differences in accounting are why adjsutable amortization periods are used. Some advertising is justifiably expensed in the current year due to the fact that its effect does not last past the current year. May I make the distinction between marketing, upfront advertisement and plaing vanilla advertising. Marketing is what MSFT does when it supports developers. Upfront advertising costs are what AOL incurred when it sent out X million disks. Plain vanilla advertising is the beer example you used. The first two almost always get capitalized/amortized. The last is dependant on the company and industry and is either expensed or a portion is capitalized (for valuation purposes and not accounting purposes). <We also have issues that emerge from mergers. For example, the SEC is now asking companies to capitalize future expenses for the completion of "in-process R&D" rather than expense them. If the SEC's guidelines are used, current earnings increase and future decrease over the life of the project, making the "pooling of interest" merger a little closer to purchase accounting which recognizes "goodwill" as a non-cash expense.> This is where Mr. Levitt agrees with my viewpoint wholeheartedely. Capitalization of expenses is essentially the same as amortizing those "quasi-investments".