Feeds

AOL to pay $3.5 million over accounting irregularities

Profits should really have been losses after all

  • alert
  • submit to reddit

The essential guide to IT transformation

AOL is to pay $3.5 million to settle federal charges against it regarding allegations of serious errors in its accounts.

The Securities and Exchange Commission (SEC) claimed the ISP had improperly accounted for certain advertising costs in the mid-90s, and put them down as assets.

AOL's debatable accounting method counted its subscriber ad costs as assets, allowing it to report profits for six out of eight quarters during 1995 and 1996. According to the SEC, the US company would have reported losses for those periods had the associated costs with getting new customers been accounted for as expenses.

AOL decided to play it safe. It neither admitted nor denied the charges, but agreed to pay up. It also claimed to have abandoned the accounting practice around four years ago.

The SEC's move, which resulted in the biggest monetary scolding ever for a settlement that didn't involve fraud charges, was meant to keep the Web community on its toes. It said AOL should never have used the accounting method "because the volatile and unstable nature of the Internet marketplace precluded reliable forecasts of future revenues".

It added: "The broader point is to teach the message that we're paying very careful attention to what's going on in the accounting practices in the Internet business."

But the incident shouldn't relegate AOL to the ISP scrapheap. Its president Bob Pittman said the group, set to merge with Time Warner, expected combined sales of $40 billion in 2001. ®

5 things you didn’t know about cloud backup

More from The Register

next story
True fact: 1 in 4 Brits are now TERRORISTS
YouGov poll reveals terrible truth about the enemy within
Microsoft exits climate denier lobby group
ALEC will have to do without Redmond, it seems
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
7 Elements of Radically Simple OS Migration
Avoid the typical headaches of OS migration during your next project by learning about 7 elements of radically simple OS migration.
BYOD's dark side: Data protection
An endpoint data protection solution that adds value to the user and the organization so it can protect itself from data loss as well as leverage corporate data.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?