Warning 1:  Many of the links were broken when the FASB changed all of its links.  If a link to a FASB site does not work , go to the new FASB link and search for the document.  The FASB home page is at http://www.fasb.org/ 

Warning 2:  In February 2008 the FASB for the first time allowed users free access to its "FASB Accounting Standards Codification" database. Access will be free for at least one year, although registration is required for free access. Much, but not all, information in separate booklets and PDF files may now be accessed much more efficiently as hypertext in one database. The document below has not been updated for the Codification Database. Although the database is off to a great start, there is much information in this document and in the FASB standards that cannot be found in the Codification Database. You can read the following at http://asc.fasb.org/asccontent&trid=2273304&nav_type=left_nav

Welcome to the Financial Accounting Standards Board (FASB) Accounting Standards Codification™ (Codification).

The Codification is the result of a major four-year project involving over 200 people from multiple entities. The Codification structure is significantly different from the structure of existing accounting standards. The Notice to Constituents provides information you should read to obtain a good understanding of the Codification history, content, structure, and future consequences.

Click here to view the Notice to Constituents (Adobe Acrobat format).

 Bob Jensen's Introduction to e-Business and e-Commerce
http://www.trinity.edu/rjensen/ecommerce/000start.htm

Bob Jensen at Trinity University

Top 25 Google e-searches of the month
          Most Popular Web Sites 2006 - 2007 --- http://www.webtrafficstation.com/directory/
          WebbieWorld Picks --- http://www.webbieworld.com/default.asp

How E-commerce Works --- http://money.howstuffworks.com/ecommerce.htm 

Electronic Commerce:  The Fastest Growing Phenomenon in World Commerce

Electronic Commerce:  Special Problems Arising for Accountants and Auditors  

Electronic Commerce:  Webledgers  

Electronic Commerce:  Revenue Accounting Problems and Related Financial Accounting Issues --- http://www.trinity.edu/rjensen/ecommerce/eitf01.htm 

Electronic Commerce:  Training and Education Issues 

Electronic Commerce:  Assurance Services Opportunities and Risks 

Illustration of Topics in a Continuous Assurance Symposium 

Investor Relations and Internet Reporting  

XBRL Will Change the World of Financial Reporting and Analysis --- 
http://www.trinity.edu/rjensen/XBRLandOLAP.htm#XBRLextended 

Education and Online Training Issues  

A Special Section on Computer and Networking Security (including spam fighters)  

Introduction 

How to make stolen laptop data useless to thieves

Is your data safe? Survey reveals scandal of snooping IT staff

Viruses

Spyware  (and SiteAdvisor)

Cell Phone Records are for Sale 

Phishing , Pharming, Vishing, Slurping, and Spoofing

Pretexting

Cookies 

Spam Blocking 

Searching Dangers:  Beware of Search Engines

Hacking Into Systems

Security on Public Wireless Networks

Denial of Service Attacks 

Spy Tools:  How safe are unlisted phone numbers?

Forget Big Brother, Now You Are Being Watched by Almost Anybody

Weapons of Information Warfare  

Threads on Firewalls --- Go to  http://www.trinity.edu/rjensen/firewall.htm 

Identity Theft http://www.trinity.edu/rjensen/FraudReporting.htm#IdentityTheft 

Encryption

New Tech Tools to Combat Fraud

The Downside: Psychology of Electronic Commerce and Technology 

Intangibles Accounting Issues --- http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#TheoryDisputes 

Managerial Accounting Issues --- http://www.trinity.edu/rjensen/ecommerce/managerial.htm 

How Can Technology be Used to reduce Fraud? --- http://www.trinity.edu/rjensen/ecommerce/managerial.htm#Issue7 

ROI Issues --- http://www.trinity.edu/rjensen/roi.htm 

Implications for Auditing and Assurance Services --- 
http://www.trinity.edu/rjensen/ecommerce/assurance.htm 

Opportunities of E-Business Assurance & Security:  Risks in Assuring Risk --- http://www.trinity.edu/rjensen/ecommerce/assurance.htm 

Accounting Fraud, Forensic Accounting, Securities Fraud, and White Collar Crime

The Controversial Electronic Commerce of Education --- http://www.trinity.edu/rjensen/000aaa/0000start.htm

Investor Relations and Internet Reporting   

Education and Training   

Evaluation of Websites 

Search for Internet, e-Commerce, or e-Business Phrases

Top Year 2002 Accounting Technologies 

Bob Jensen's Threads on Electronic Commerce --- 
http://www.trinity.edu/rjensen/ecommerce.htm 

Bob Jensen's Threads on Electronic Commerce in College Curricula --- 
http://www.trinity.edu/rjensen/ecommerce/curricula.htm 

Accounting Threads

• Bob Jensen's Tutorials on eCommerce, eBusiness, and eEducation
  
  
• Threads on Fees and Choosing Accountants, Financial Advisors, and Consultants
  
  
• FAS 133 Threads (including audio links to experts)
  
  
• Accounting Theory
  
  
• Accounting Information Systems

• Enterprise Resource Planning (ERP) Education Modules
  
• Assigments
  
•   Helpers

• Accounting Fraud, Forensic Accounting, Securities Fraud, and White Collar Crime
  
  
• Opportunities of E-Business Assurance:  Risks in Assuring Risk
  
  
• A Special Section on Computer and Networking Security  
  
  
• Threads on Firewalls
  
  
• Bob Jensen's Technology Glossary
  
  
• Computers in Accounting: Past, Present, and Future
  
  
• Bob Jensen's Threads on the Decline in Accounting Majors in U.S. Colleges 
   
  
• CPA --- Career Passed Away
  
  
• Glossaries
  
  
• Bob Jensen's Threads on Real Options, Option Pricing Theory, and Arbitrage Pricing Theory 
  
  
• Bob Jensen's Threads on Return on Investment (ROI)
  
  

Bob Jensen's Threads on Accounting Fraud, Forensic Accounting, Securities Fraud, and White Collar Crime

Bob Jensen's Technology Glossary

Bob Jensen's threads on computer security are under "Security" (in the S-Terms) at http://www.trinity.edu/rjensen/245gloss.htm
Also look under the C-Terms for "Cookies."

Top 25 Google e-searches of the month
          Most Popular Web Sites 2006 - 2007 --- http://www.webtrafficstation.com/directory/
          WebbieWorld Picks --- http://www.webbieworld.com/default.asp

I created a timeline of major happenings (on a timeline) leading up to the eXtensible Business Reporting Language (XBRL) and On LIne Analytical Process (OLAP) systems.  Overviews of XML, VoiceXML, XLink, XHTML, XBRL, XForm, XSLT, RDF and the Semantic Web are also provided --- http://www.trinity.edu/rjensen/xmlrdf.htm

This is what Professor Jim Mahar says about ERisk in the March 24, 2003 edition of TheFinanceProfessor (an absolutely fabulous newsletter) --- www.FinanceProfessor.com 

Erisk.com. I simply love the site. I know it has been site of the week before, but it is so good, it earned it again. Try it, you’ll love the case studies and the newsletter! http://www.erisk.com

ERisk --- http://www.erisk.com/ 

ERisk is the leading provider of strategic solutions for risk and capital management. We deliver a unique combination of world-class analytics for risk-based capital, strategic risk management expertise, risk transfer advice and risk information.

You can find out more about our products and services in the Overview section. On this page, you can find out more about the people and ideas that power our company.

The ERisk Report --- http://www.erisk.com/about/about_company.asp?ct=n#report 

The ERisk Report is a concise monthly briefing for senior financial executives. Every month, contributors from ERisk's team of risk management experts address today's most pressing issues in strategic risk and capital management. Sign up today for your personal copy of this cutting-edge publication!

Vol 1.6: Measuring the return on risk management; leveraging the economic benefits of risk management

Vol 1.5: Putting the real value on customer relationships; rolling out risk management

Vol 1.4: Making risk more transparent; fed takes pulse of economic capital practices

Vol 1.3: Credit scoring: robots versus humans; James Lam's three lessons from Enron

Vol 1.2: Weathering credit losses; regulators line up behind economic capital

Vol 1.1: Revamping your credit ratings system; measuring bank profitability

The ERisk Portal --- http://www.erisk.com/portal/home.asp 
Resources for Enterprise Risk Management

ERisk today continues to successfully develop and install its analytics at client sites, conduct high-value consulting engagements, offer unbiased advice on risk transfer alternatives, and attract thousands of readers to the ERisk portal.

"New e-Accounting Advisor Network Debuts," SmartPros, September 29, 2003 --- http://www.smartpros.com/x40720.xml 

Insynq Inc., a provider of Internet-delivered online accounting solutions and services, has launched an online advisor network to assist the accounting professional by supporting back-office processing requirements on a highly cost-efficient basis.

The e-Accounting Advisor Provider Network (http://eaccounting.cpa-asp.com) has created a new cost-effective resource for practices of all sizes to use to expand their practice, or to provide the opportunity of higher gross margins, Insynq announced. Through the use of business process outsourcers -- such as call centers, payroll and HR processing services -- professional practices are able to improve client services, expand their practices, and improve practice profitability.

"These accountants have gained a comprehensive solution that combines our online accounting technology services with business process outsourcing models," said Insynq president John Gorst. "e-Accounting is one of the few providers in the industry with a service model that encompasses online accounting applications, data management, document management and workflow tools."

Insynq will co-sponsor a series of seminars in the top 25 U.S. markets over the next four months for CPAs, accountants and bookkeepers that explain the online accounting model. These seminars will detail the outsourced accounting opportunity, and demonstrate the benefits of using business process outsourcers in support of practice initiatives.

Electronic Commerce

ONLINE SPENDING CLIMBED 25% during the holiday season from a year earlier, a survey found.
Desiree J. Hanford, The Wall Street Journal, January 4, 2005 --- http://online.wsj.com/article/0,,SB110478868075315675,00.html?mod=technology_main_whats_news

Question
What turns Web retailing into eCommerce?

Answer
A special feature about eCommerce is revenue collection over the Internet.  Today that revenue collection typically entails online credit card transacting.  

Bob Jensen's threads on accounting for electronic commerce are at http://www.trinity.edu/rjensen/ecommerce.htm 

"E-tailing Comes of Age," by Nick Wingfield, The Wall Street Journal, December 8, 2003 --- http://online.wsj.com/article/0,,SB10708342997640400,00.html?mod=technology%5Ffeatured%5Fstories%5Fhs 

Dot-com retailers had a message for bricks-and-mortar stores at the start of the 1999 holiday season: We're coming after you.

A year or two later, traditional retailers had their revenge, of course, when stock certificates of such companies as Pets.com Inc., eToys Inc. and Webvan Group Inc. were fit for little more than wrapping paper. With some notable exceptions -- including Amazon.com Inc. and eBay Inc. -- established stores and catalog companies ended up snaring most of the online sales.

But something surprising happened: Some small Web-only retailers refused to die. A handful in unlikely categories such as jewelry, shoes and luggage are profitable and growing far more quickly than their offline counterparts.

These specialty online retailers are prospering at a time when overall online sales are booming. Consumers are expected to spend $12.2 billion online this year in the Thanksgiving-to-Christmas period, up 42% from last year, according to Forrester Research of Cambridge, Mass. The growth reflects a steady shift of retail spending to the online world, as consumers grow more comfortable with the Internet and the spread of high-speed home connections makes browsing and ordering simpler. Online shopping also tends to be more weather-proof; many snowbound Northeasterners ventured out into cyberspace instead of the elements to continue their holiday shopping this past weekend.

Still, a mere 4.5% of total retail spending is expected online this year, compared with 3.6% in 2002. But even the small shift in retail sales represents a combined billions of dollars for Internet retailers.

Traditional retailers are doing their best to keep holiday customers clicking on their sites by offering good deals. Some are discounting heavily; free-shipping offers are commonplace. Gap Inc., for instance, is waiving standard delivery fees on orders of $100 or more until Dec. 15.

Continued in the article

There were 50 global online users of the new World Wide Web in 1990.  The worldwide growth is connected consumers, businesses, and other types of organizations is staggering.  A study conducted by IDC (2001) estimates the following at http://www.filmsoho.com/marketing/marketing_internet.html 

 Use of the Internet continues to grow rapidly worldwide. This growth is fuelling e-commerce transactions which are one barometer of the commercial success of the medium. Almost 1 billion people (about 15 percent of the world's population) are forecast by research firm International Data Corp to be using the Internet by 2005. IDC foresee a spending of more than $5 trillion in Internet commerce representing a staggering 70 percent compound annual growth rate from last year's Internet spending of $354 billion in 2000.

The adoption of the Internet as a communications tool is still undergoing explosive growth. In the developed world the proliferation of mobile phones and other Internet access devices will maintain these growth rates even once PC penetration has reached saturation.

Growth statistics are provided the following sites:

Electronic Commerce - A Leading Definition --- http://www-cec.buseco.monash.edu.au/links/ec_def.html 

A broad definition of 'electronic commerce' is provided by Electronic Commerce Australia (ECA, formerly EDICA) in its 1994 Annual Report as:

The process of electronically conducting all forms of business between entities in order to achieve the organisation's objectives.

The term 'electronic commerce' embraces electronic trading, electronic messaging, EDI, EFT, electronic mail (e-mail), facsimile, computer-to-fax (C-fax), electronic catalogues and bulletin board services (BBS), shared databases and directories, continuous acquisition and lifecycle support (CALS), electronic news and information services, electronic payroll, electronic forms (E-forms), online access to services such as the Internet (discussed later), and any other form of electronic data transmission.

For example, medical and clinical data, data related to taxation, insurance, vehicle registration, case information involving legal proceedings, immigration and customs data, data transmitted for remote interactive teaching, video-conferencing, home shopping and banking, EDI purchase orders and remittance advices - are all applications of electronic commerce.

The term 'electronic commerce' is sometimes incorrectly used as an alternative to EDI. EDI, a subset of electronic commerce, refers specifically to the inter-company or intra-company transmission of business data in a standard, highly structured format. Electronic commerce, however, includes structured business data and unstructured messages or data, such as electronic memos sent via e-mail.

Another term, 'electronic trading', is commonly used to refer to electronic transactions which occur in the procurement of goods and services. Electronic trading uses structured and/or free-form messages. Electronic trading can also be considered a sub-set of electronic commerce.

Small Business Administration: Free Online Courses (video) ---  http://www.sba.gov/services/training/onlinecourses/index.html

"Amazon Finally Clicks:  Ten years old and profitable at last, it offers a textbook lesson on how to be both focused and flexible," by Russ Banham, CFO Magazine, Spring 2004 Special Issue, pp. 20-22 --- http://www.cfo.com/article/1,5309,12598||M|846,00.html 

The foosball tables are still there, as are the desks made from sawhorses, plywood, and old doors. And no one wears a tie, not even CFO Thomas J. Szkutak. But if some E-commerce trappings are alive and well at Amazon.com headquarters, others are not. Red ink, for example, has disappeared—at least for now. The company posted its first indisputably (that is, GAAP-based) profitable year in 2003, propelled by strong holiday sales and a weakened dollar, which boosted overseas results.

That has prompted plenty of backslapping in the halls of Amazon's headquarters, a former hospital with an improbable Art Deco design and a postcard view of downtown Seattle and Puget Sound. As it prepares to celebrate its 10th anniversary, Amazon.com is a very different company from the so-called E-tailer that, at the time of its initial public offering in 1997, had to caution would-be investors not to confuse it with Amazon Natural Treasures, a retailer and E-tailer of rain-forest products.

Few would make that mistake today. While still sometimes referred to as an online bookstore, Amazon now boasts a product line that staggers the imagination, from apparel, sporting goods, and jewelry to new services including a feature that lets customers make "1-Click" Presidential campaign contributions.

Behind Amazon's breadth of products and services are myriad business arrangements: some products the company owns, inventories, sells, and ships; others it sells on behalf of third-party retailers. Some of these third-party products Amazon ships and fulfills; others are shipped and fulfilled by the third parties themselves. Among those third parties are thousands of mom-and-pop E-tailers that collectively make Amazon's Marketplace division a perpetual online garage sale surpassed only by E-bay.

With 39 million active customer accounts (based on the number of E-mail addresses from which orders originated in 2003), Amazon seems to be making good on its promise to offer the "Earth's biggest selection of products," or as Szkutak puts it, "to build a place where people can find, discover, and buy anything they want online." To do that, he says, the company has learned—sometimes the hard way—to "start with the customer and work backward."

Working backward has changed Amazon from an online retailer to an E-commerce platform. Today, it is not a store so much as a channel, a place where brand-name third-party retailers, smaller businesses, and just plain folks can hawk their goods to a worldwide clientele. This past holiday season, shoppers traipsed through Amazon to buy products from Gap, Toys "R" Us, True Value Hardware, and Kitchen Etc.—and maybe some kid in Idaho who was trying to unload his slightly dog-eared Harry Potter library. Assembling such a vast collection of partners and building the systems that allow customers to buy from an individual as easily as they buy from a retail giant has not been easy, and analysts praise Amazon's achievements. "Amazon has knocked 10 steps down to 1," says Adam Sarner, a research analyst at Stamford, Connecticut-based technology research firm Gartner Inc. "This is what they mean by 'customer convenience.'"

Jonathan Gaw, a research manager at technology research firm IDC, says, "No one else has this kind of expertise, because no one else has invested the capital to build this kind of infrastructure."

Amazon.com was once viewed as a leading member of the E-commerce vanguard, but most of the followers have fallen by the wayside. True, the survivors—E-bay, MSN, AOL, Yahoo, and Google—have become household names, but success remains precarious and depends on, among other things, the ability to be nimble. Amazon built its brand initially on low-priced books and waited for customers to come bargain-hunting. Today it pulls out all the stops to get people to visit, from "never-before-seen" Bruce Springsteen concert footage to a "secret message" from Madonna. If that sounds like the sort of pop-culture gimmickry one might expect from, say, AOL, there's good reason: the E-commerce giants are out to eat one another's lunch. When Google, for example, announced Froogle, a new service that allows users to search for a product name and be directed only to sites that sell that product, Amazon launched a new subsidiary, A9, devoted to Web searching, and even located its offices close to Google in Silicon Valley. Similarly, the boundaries between the business models of E-bay, Yahoo, and even Microsoft can be hard to discern, as all of these companies seek to protect themselves and to copy whatever seems to work.

Continued in the article

Yahoo's Links to Electronic Commerce Sites

The U.S. Government Knows How to Sell Online (e-Commerce)
From InformationWeek Online May 30, 2001

Uncle Sam Rings Up $3.6B In Online Sales

Look out, Jeff Bezos. Amazon.com Inc.'s $2.8 billion in annual revenue has been eclipsed by another E-commerce contender--a purveyor of flame throwers, burros, and Lamborghini Diablos that generated $3.6 billion in sales last year. The mastermind behind this E-retailing juggernaut? Uncle Sam.

That revelation comes from a recent study by the Pew Internet & American Life Project and Federal Computer Week magazine, which tracked the government's E-commerce activity. Of course, straight revenue comparisons may not be fair. After all, it's not exactly a level playing field for Amazon since the government's $3.6 billion came from 164 sites. That was a bit of a shock for Allan Holmes, editor-in-chief of Federal Computer Week. "When we first started, I had no idea how many sites we would find. I thought maybe a few dozen." Plus, that revenue figure would be significantly lower without the Treasury Department, which generated $3.3 billion from the sale of bonds and notes.

But the remaining $300 million in sales is still a significant achievement, considering the government hasn't done much to promote its efforts. Looking to bid on luxury items such as helicopters or sports cars? Try Bid4Assets, which sells property seized by the U.S. Marshals Service in criminal raids. "The federal government has always had surplus property and auctioned off property seized in drug busts. Now they're able to do it more efficiently and reach more people," Holmes says.

While so many others are still struggling to make the Web pay, Walt Disney's Internet ventures are thriving --- http://www.wired.com/news/business/0,1367,56314,00.html 

LOS ANGELES, November 11, 2002 -- Last year, the Walt Disney Co. surrendered in the Internet portal wars after spending hundreds of millions of dollars to compete against Yahoo!, America Online and others.

But it didn't give up entirely. In a strategic retreat, the company refocused on Web projects that highlighted its core brands, such as ABC News and ESPN, which is the exclusive provider of sports on the MSN service.

That strategy has started to pay off. Last week, Disney announced a modest milestone -- its Internet properties are profitable.

The company doesn't report the results of its Internet properties as a group, so Disney did not provide any profit figure when it reported fourth-quarter earnings. But the company said profits from individual sites, led by ESPN and Disney's online store; from licensing content to other Internet sites; and from advertising and subscriptions pushed online operations into the black.

Disney's Internet ventures contribute only about several hundred million dollars to the company's $25 billion in annual revenue. Nonetheless, Disney can say it is profiting online while so many others are still struggling to make the Internet pay.

"I feel good that we've been able to sort of figure it out," said Steve Wadsworth, president of the Walt Disney Internet Group.

What Disney learned and other companies are discovering is that it's best to abandon a one-size-fits-all approach to the Web.

"There is not one single formula that is going to work," said Charlene Li, principal analyst for Forrester Research, a technology consulting firm based in Cambridge, Mass. "What works for Disney.com and its characters isn't the same thing that will work for ESPN. Even The New York Times and The Boston Globe are completely different. They're owned by the same company, but they use completely different approaches."

Disney's announcement of its modest profit is a victory of sorts for chairman and CEO Michael Eisner. During the heyday of e-commerce, he resisted pressure to merge with Yahoo or Microsoft, even after AOL merged with Time Warner.

Today, AOL is struggling, weighed down by declining advertising revenue and a government investigation into its accounting practices. Chairman Steve Case reportedly has considered separating the companies.

Continued at http://www.wired.com/news/business/0,1367,56314,00.html 

Webledger alternatives are becoming a much bigger deal in accounting information systems.  I suspect that many accounting educators are not really keeping up to date with the phenomenal growth in vendor services.

I am a strong advocate of Webledger accounting and information systems.  
In my viewpoint they are the wave of the future for small and even medium-sized business and other organizations.  The main obstacle is overcoming the natural tendency to fret over having data stored with a Webledger vendor.  But the advantages of cost savings (e.g., savings not having to employ technical database and IT specialists. savings in hardware costs, and savings in software costs), advantages of worldwide access over the Internet, and advantages of security (due to the millions invested by vendors to ensure security) far outweigh the disadvantages until organization size becomes so overwhelming that Webledgers are no longer feasible for accounting ledgers, inventory controls, payroll processing, billings, etc.

Webledger software and databases offer accounting, bookkeeping, inventory control, billings, payrolls, and information systems that can be accessed interactively around the globe.  Companies and other organizations do not maintain the accounting systems on their own computers.  Instead, the data are stored and processed on vendor systems such as the Oracle database systems used by NetLedger.

NetLedger is part of the NetSuite described at http://www.netledger.com/portal/home.shtml

Click on the "See One System in Action" Link

NetSuite's all-in-one business management application allows each user to work off the same, real-time information, but with a user interface and functionality appropriate to them. Watch the role-based demo

As a project in Fall of 2000, a team of my students set up an accounting system on Netledger.  This team's project report is available at http://www.trinity.edu/rjensen/acct5342/projects/Netledger.pdf

Bob Jensen’s threads on Webledgers can be found at http://www.trinity.edu/rjensen/webledger.htm 

A Guide to E-Commerce at http://e-comm.internet.com/

An Electronic Encyclopedia  at http://e-comm.internet.com/library/glossary.html
A longer listing of this and similar glossaries can be found at http://www.trinity.edu/rjensen/245gloss.htm

U.S. Policy on E-Commerce at http://www.ecommerce.gov/

Electronic Books Directory (U. Mn.)

Electronic Commerce World: On-line journal for electronic commerce - Articles, Resource Directory, Discussions

Electronic Commerce:  Special Problems Arising for Accountants and Auditors  

Question
Were accountants responsible for the dotcom bubble and burst at the turn of the Century?

Jensen Answer
The article below fails to directly mention where auditors contributed the most to the 1990's bubble. The auditors were allowing clients to get away with murder in terms of recognizing revenue that should never have been recognized. The dotcom companies were not yet making profits but were full of promise as the bubble filled with hot air. In financial reporting (especially in pro forma reporting) dotcom companies shifted the attention from profit growth to revenue growth. But much of the revenue growth they got away with reporting was due to bad judgment on the part of their auditors. Corrections finally began to appear after the EITF belatedly made some bright line decisions --- http://www.trinity.edu/rjensen/ecommerce/eitf01.htm

I give auditors F grades when auditing the hot air balloons of dotcom companies. This shows what can happen when we let judgment overtake some of the bright line rules in accounting standards. Auditors were supposed to have "principles" when they had no bright lines to follow. The auditing firms demonstrated their lack of professional principles in the 1990s.
 

"Were accountants responsible for the dotcom bubble and burst?" AccountingWeb's U.K. Site, March 11, 2008 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=104768

"Were accountants responsible for the dotcom bubble and burst?" This worrying allegation emerged from a question two weeks ago at the ICAEW IT Faculty annual lecture.

During a thought-provoking talk on Second Life and related issues, Clive Holtham mentioned the dotcom bubble, which prompted the pointed follow-up question from one audience member.

The answer was that they weren't - which accorded with the general audience reaction. The reason? Accountants, Holtham argued, had not made the investment and business decisions that fuelled the boom and led to the bust.

Some would argue that this is exactly why accountancy, perhaps more than accountants, was responsible. Why weren't accountants more involved in these decisions? We would surely expect accountants to have been stressing the need to temper the wild enthusiasm with a bit of solid business analysis. It's hard to escape the conclusion that accountants either didn't put forward the right arguments, or were not sufficiently influential. Accountants either lacked the confidence to participate forcefully enough in the debate, or were viewed as not knowing enough about IT.

Either way, it suggests that the main accountancy bodies had allowed a major change in business to occur without preparing their members to deal competently and confidently with it. If technology had been seen as a natural competency of an accountant, accountants might have been more able to fight their corner over the excesses of the dotcom era.

Anyway, that was years ago. Surely things have changed. The recent AccountingWEB/National B2B Centre survey on accountants' involvement in ebusiness was introduced in the following terms: "In spirit accountants would like to get involved with ebusiness, but the reality of their current knowledge and workload means that only a small minority are able to help clients take advantage of new technology opportunities."

It's unfair to blame the accountants themselves. Their workload is a significant factor. Government has been piling regulation after regulation upon them and it must be a struggle to keep up with just what they consider their core skills and knowledge. Ethically, you would not expect accountants to offer advice in areas in which they do not consider themselves adequately qualified. Technology is such a vast and rapidly moving area that it's pretty hard for most full time IT professionals to keep up, let alone accountants with their myriad other responsibilities. Yet the need, and opportunity, certainly seems to be there. Various government initiatives in the past have sought to identify sources of competent advice to help companies succeed in ebusiness.

Usually, articles about accountants doing more in the field of IT elicit comments about "leaving it to the IT professionals". The worry is that accountants may not know enough to be able to do so confidently and therefore they withdraw from any involvement - this is what the AccountingWeb/NB2BC survey seems to suggest is happening. This is in nobody's interest. Businesses may fail to exploit key opportunities, accountants will lose out on income and probably credibility, and IT specialists will have fewer clients. A more ebusiness-confident accountancy profession should be able not only to offer advice itself, but also to recommend, trust and work with specialists where required.

To achieve this it's vital that the professional bodies help their members more than they are doing currently. What seems to be missing is a set of boundaries. What exactly do accountants need to know about IT and ebusiness in order to be able to confidently and competently advise their clients? How can you, as an accountant, assess your competence in this vital area?

It's not as if this is anything new, The International Federation of Accountants (IFAC) has been working on a revised Education Practice Statement regarding 'Information Technology for Professional Accountants' for years and in October 2007 released International Education Practice Statement 2 (IEPS 2) after consultation with accountancy bodies worldwide. This sets out "IT knowledge and competency requirements" for the qualification process, but also for continuing professional development.

So should accountants be more active in advising on ebusiness? Should they do it themselves or work with specialists? And are the professional bodies doing enough to help their members in this, and other IT related, areas? We look forward to hearing the views of AccountingWEB members so that we can carry this debate forward.

March 12, 2008 reply from Bob Jensen

With all due respects to Ed and Jagdish, I still think that inflated revenue reporting and other creative accounting ploys led to a bubble of artificially inflated stock prices of dotcom companies. It was more than the "premature revenue recognition" that Ed mentions. It was reporting of questionable revenues that would never be realized in cash. For example dotcomA contracts with dotcomB, dotcomC, ..., dotcomZ to trade advertising space on Websites and vice versa for all combinations of contracting dotcom companies. Each company counts the trade at estimated value as revenue and expense even though there will never be any cash flows for these advertising trades.

The dotcom companies did not inflate profits with this move but they dramatically inflated revenues which was all they cared about since the investing public never expected them to show a profit early on. You can read about how bad this bartering scam became --- http://www.trinity.edu/rjensen/ecommerce/eitf01.htm#Issue02
And auditors let the dotcom companies get away with this scam until EITF 99-17 made auditors finally recognize the errors of their ways.

Other revenue inflation scams and questions raised in the following issues resolved by by various EITF pronouncements --- http://www.trinity.edu/rjensen/ecommerce/eitf01.htm

Revenue Issue: Gross versus Net

Issue 01: Should a company that acts as a distributor or reseller of products or services record revenues as gross or net?
Examples of Creatively Reporting at Gross:

Priceline.com brokered airline tickets online and included the full price of the ticket as Priceline.com revenues. This greatly inflated revenues relative to traditional ticket brokers and travel agents who only included commissions as revenue.

eBay.com included the entire price of auctioned items into its revenue even though it had no ownership or credit risk for items auctioned online.

Land's End issued discount coupons (e.g., 20% off the price), recorded sales at the full price, and then charged the price discount to marketing expense.

Issue 02: Should a company that swaps website advertising with another company record advertising revenue and expense?

Issue 03: Should discounts or rebates offered to purchasers of personal computers in combination with Internet service contracts be treated as a reduction of revenues or as a marketing expense?

Issue 04: Should shipping and handling fees collected from customers be included in revenues or netted against shipping expense?

Discounts and rebates are traditionally deducted from gross revenues to arrive at a net revenue figure that is the basis of revenue reporting. Internet companies, however, did not always follow this treatment. Discounts and rebates have been reflected as operating expenses rather than as reductions of revenue.

Handling fees and pricing rebates throughout accounting history could not be included in revenues since the writing of the first accounting textbook. Auditors knew this very well from the history of accounting, but it took EITF 00-14 in Year 2000 to remind auditors that this bit of history applied to dotcom companies as well as mainstream clients.

Definition of Software

Issue 07: Should the accounting for products distributed via the Internet, such as music, follow pronouncements regarding software development or those of the music industry?

Issue 08: Should the costs of website development be expensed similar to software developed for internal use in accordance with SOP 98-1?

Revenue Recognition

Issue 9: How should an Internet auction site account for up-front and back-end fees?

Issue 10: How should arrangements that include the right to use software stored on another company’s hardware be accounted for?

Issue 11: How should revenues associated with providing access to, or maintenance of, a website, or publishing information on a website, be accounted for?

Issue 12: How should advertising revenue contingent upon “hits,” “viewings,” or “click-throughs” be accounted for?

Issue 13: How should “point” and other loyalty programs be accounted for?

Prepaid/Intangible Assets vs. Period Costs

Issue 14: How should a company assess the impairment of capitalized Internet distribution costs?

Issue 15: How should up-front payments made in exchange for certain advertising services provided over a period of time be accounted for?

Issue 16: How should investments in building up a customer or membership base be accounted for?

Miscellaneous Issues

Issue 17: Does the accounting by holders for financial instruments with exercisability terms that are variable-based future events, such an IPO, fall under the provisions of SFAS 133?

Issue 18: Should Internet operations be treated as a separate operating segment in accordance with SFAS 131?

Issue 19: Should there be more comparability between Internet companies in the classification of expenses by category?

Issue 20: How should companies account for on-line coupons?

In nearly every instance dotcom companies were inflating the promise of their new companies with creative accounting blessed by their auditors until the EITF and other FASB pronouncements set some bright lines that auditors had to stand behind. The investing public was nearly always misled by both the audited financial statements and the pro forma statements of dotcom companies in the 1990s. Then the bubble burst, in part, by bright line setting by the EITF and the FASB.

Bob Jensen

Especially note the revenue recognition issues at http://www.trinity.edu/rjensen/ecommerce/eitf01.htm 

You must be very careful when viewing a corporate Website that you think is authentic but is a total fraud.  One such site is http://www.dowethics.com/  which spoofs the genuine http://www.dow.com 

The site at dowethics.com is a very clever spoof site that mirrors the real corporate site but runs it with stories against the company.  It is interesting because it appears to be very authentic and illustrates how companies really do need authentication seals such as Verisign, the Better Business Bureau BBB seal, or the WebTrust Seal --- http://www.trinity.edu/rjensen/ecommerce/000start.htm#SpecialProblems 

Electronic Commerce:  Revenue Accounting Problems and Related Financial Accounting Issues --- http://www.trinity.edu/rjensen/ecommerce/eitf01.htm 

• What company was voted the 1996 Internet Company of the year and how did this company later drastically revise the electronic business model.?  

  Answer:  
  General Electric in 1996 had a separate part of GE for electronic commerce.  Several years later, GE did away with the electronic commerce unit and elected to build electronic commerce into virtually all divisions of the company.

  
  

• Increased interdependency between organizations.  
  Under the agreement, P&G has access to certain portions of Wal-Mart's inventory data.   When Wall-Mart's inventory of P&G goods reaches a certain level, P&G automatically arranges for shipment of additional inventory.
  
  
• Impact on business models
  
  • value-added chains broken and reformed (e.g., closing down of physical stores and opening of virtual stores)
  • new marketing, transportation, and supply channels (e,g., FedEx "Supply Chain Services")
  • increasing value of  knowledge assets
  • changing infrastructure of factories and warehouses (e.g., Amazon.com discovered it had to build new warehouses)
  • decentralization of employees and services such as virtual on-site service of computer hardware using technicians anywhere in the world)
    
    
• Type of network (EDI, LAN, WAN, Internet, etc.)
  
  
• Audit trail
  
  
• Security and privacy, including newer types of assurance services such as WebTrust and SysTrust
  
  
• Accounting issues such as new types of business ventures and transactions that were not envisioned in existing GAAP
  
  
• Declining value of items accounted for under GAAP and rising value of items not accounted for under GAAP
  
  
• The breakdown of traditional decision aids such as ROI estimates
  
  
• The rise of gimmicks such as "Pro Forma" and "core"not covered under GAAP
  

• Taxation issues such as how to replace sales taxes on declining in-store purchases and lost taxes on foreign transactions
  
  
• Financing issues, especially how to finance an e-Commerce business like Amazon.com for years of phenomenal growth during which there are accounting losses every year
  
  
• The future of the dot.com companies after their fall from grace
  
  
• Impact on financial reporting and analysis, especially XBRL
  See http://www.trinity.edu/rjensen/xmlrdf.htm