The media and online news sources have been full of stories about the SEC’s hearings on independence issues, yet one sector that is fully aware of the Commission’s monumental presence—apart from the independence issue—is the dotcom accountant.
Why? The world of the dotcom is about spending money to make money, and the way income or losses are reported is paramount to regulators. There are two basic ways to report: in a profit and loss account or capitalized as an asset.
Perhaps the most high-profile example to date is America Online, who was penalized by the SEC because of the way it capitalized the assets connected with acquiring new customers instead of expensing them. AOL reported this as an asset on the balance sheet because they used the money to fund the marketing program.
What’s next? It’s anyone guess, but suffice it to say that the SEC will be watching start-up dotcoms very carefully in the next several years.