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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: JGoren who wrote (23177)	3/1/1999 1:05:00 AM
From: JC Reddy	Read Replies (1) \| Respond to of 77400

Accounting rule makers provoke outcry from Cisco By Elizabeth Smith NEW YORK, Feb 26 (Reuters) - Now that U.S. accounting rule makers have moved to eliminate a popular merger write-off tool, tech heavyweight Cisco Systems (Nasdaq:CSCO - news) said it would fight back and enlist the help of other giants such as Intel Corp. (Nasdaq:INTC - news) and Hewlett-Packard Co. (NYSE:HWP - news). Cisco, which has relied heavily on the write-off, said eliminating it would jeopardize the capital structure that fosters growth of tech start-ups. ''We are worried about the eco system that creates Silicone Valley,'' said Dan Scheinman, Cisco's vice president of legal and government affairs. ''Why kill the goose that lays the golden egg.'' A tentative decision reached by the Financial Accounting Standards Board (FASB) on Wednesday now kicks off a formal process to change the rule. The U.S. accounting rule-making body must give companies a change to argue against the proposed change, though. Both Intel and Hewlett-Packard were not immediately available to comment. If in the end FASB wins, companies would have to amortize and capitalize ''acquired in-process R&D costs.'' That means treating the costs as assets on balance sheets and posting depreciation of those assets against future earning. Wall Street frowns upon that approach, instead preferring the one-time charges that leave a balance sheet unblemished. Squashing the write-off would slow the pace of acquisitions and discourage venture capitalists from investing in start-ups, Scheinman contended. Instead, larger companies would opt to beef up their own R&D operations, he said. The issue has attracted attention from the Securities and Exchange Commission, which wrote to several companies urging them not to overvalue acquired R&D costs. Scheinman said Cisco had gotten a thumbs-up from the SEC on writing off $350 million in acquired R&D costs for its fiscal quarter ended Feb. 3. Cisco said it would not only appeal to FASB but to Congress to preserve the rule. Scheinman also questioned why a product under development should be deemed an asset since it produces no return for the company. Only one out in three tech products under development ever reach the market, he said. Todd Johnson, a project manager at FASB, says companies can indeed value acquired R&D costs as an asset, given they've paid for them. ''Companies have some inclination that the research will bear fruit, or else they would not have paid for it.'' Johnson brushed aside the notion that tech products under development should not be treated as an asset, given their one-in-three success rate. ''Exploration companies must treat oil wells as assets, and the chance of striking oil are lot less than one in three, I'll tell you that,'' he said.