Volume 5, No. 12

 

A Tale Of Two Writeoffs: America Online & Allegiance:  The U.S. trend towards overly conservative accounting continued with the recent announcements of asset writeoffs by companies in two completely different industries. America Online announced that they would be writing off their long-maligned "deferred subscriber acquisition costs" and Allegiance Corporation announced a huge goodwill impairment charge. Though the writeoffs were made for different reasons, they both reflect a bias that may be overly conservative - and thus not representative of the firms' underlying economics. In addition, one of those writedowns may touch off a spate of similar writeoffs at other companies - but not the one which most analysts and investors might expect.

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