Shell Game
Smart Business (09/00) Vol. 104, No. 34 p.12; Grossman, Wendy M.

Dot-com companies are about to see life get tougher, not only because spring's market correction devalued the shares that helped them retain staff and finance acquisitions, or because they are losing money, but because the Securities and Exchange Commission (SEC) is breathing down their necks. The SEC's push to improve financial reporting and to eliminate common accounting practices that, the commission says, hides real trends in earnings and revenues, will make things difficult for dot-coms, because for most of them, revenues are all they have to show for their hard work. John Soden, a partner at PricewaterhouseCoopers, said that currently, spending money is the primary activity of dot-coms, so they must concentrate on how the expenditure is denoted in the accounts. Soden said, "The big question is going to be, is that expense going to be written off in a profit-and-loss account for the current year, or is it in some way going to be capitalized as an asset?" He said if it is going to be capitalized as an asset, the next question should be, will it have value?

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