Well, yes -- so? When my company buys a precision machine tool, the care and effort that goes into building it results in it having a naturally long life -- much like the resulting product we sell. The software cost gets embedded in the cost of the tool. I think that is reasonable for that kind of software. But a $200 Office upgrade from Uncle Bill is worthless in a year. That's an expense, right? (Used copy paper isn't worth much either, I understand.)
> There has always been a fuzzy dividing line between what is expensed
> and what is capitalized. This has historically bedeviled the
> accounting for research and development, for example.
I work for an R&D company, like porn, we've figured out that we know an expense when we see one. Please Al, get a grip.
> The important point, however, is that decisions about which
> items to expense will have important consequences for
> reported earnings. In general, if the trend of expensed
> items that should be capitalized is rising faster than
> reported earnings, switching to capitalizing these items
> will almost always accelerate the growth in earnings. The
> reverse, of course, is also true.
Just as long as the numbers look good, eh Al? Yeah, I used to work for a guy like you, but he no longer owns the company.
> He then brought up some things that lead to overstatement of profits
> - e.g. stock options that aren't charged against earnings - but said
> on balance profits were probably understated, meaning the stock
> market's exuberance isn't irrational after all.
I know. BTW, what did ever happen to NAIRU?
These people crack me up.
Joseph Noonan jfn1 at msc.com