Agree completely with Junior Hines (I wish I knew where he worked/what he does). He points to PaidContent’s discovery that IAC is capitalizing customer acquisition costs.
Frankly, I don’t even like to capitalize IT costs. The whole process of making future numbers harder to hit makes me nervous.
Capitalizing marketing expenses basically ensures that the company is doomed at an indeterminate point in the future.
Is there a fiduciary responsibility to manage numbers and connive to prop up the stock price? I would argue that this action has done the company a disservice strategically.
What’s worse is there is never a way to undo this. Any restatement would crush the stock.
I was trying to think of an analogy that would shed more light for someone on how ridiculous this is. I started by thinking, “Can a company capitalize its sales people over the life of the customer? Like if a company had a sales person who sold a long-term deal, can they capitalize the salary of that sales person over a ten year period? So only recognize 1/10th of the salary of the sales person as an expense this year?” But that sounded so patently ludicrous, I thought it was a bad example. But then I thought, “Wait, that actually is what they are doing!”
Here is a funny question: Did Match.com increase its CPA payout after the accounting change?