Acctg 527 – Feedback on AOL Letter – Linked Writing Assignment

Average Score – 16.5

There was a wide range of success in these letters. Some struck the right tone, tied the relevant guidance to recommendations about appropriate accounting treatment, and wrote well-organized paragraphs with good flow and only minor mechanical errors. Others suggested either a rushed or challenging situation for the writers – either difficulty with tone, confusion about guidance, and mechanical problems that have not yet been resolved.

• I was looking for a tone that was assertive, but professional and, above all, tactful. Negative wording such as “inappropriate,” “violates,” “inaccurate,” “fails to comply with,” etc. are to be avoided. Instead, it is better to indicate what AOL should do as opposed to what it should not be doing. This takes considerable thought and the ability to look at the message from Mr. Leonard’s point of view. The objective is to persuade him that your position about the accounting treatment is appropriate. Be complimentary where you can. AOL is using appropriate accounting in expensing software development costs up to technological feasibility and capitalizing thereafter. The issue is the amortization period, so make recommendations about alternatives and support them with economic reasons rather than stating “AOL must change.” I have posted on our Web site what I consider to be a good letter written by a student. Take a look through it to see how it is both assertive and tactful at the same time.

• In the “content and guidance” areas, I was looking for some specific issues to be addressed that come directly from the case and which would meet the requirement that the discussion be based on “relevant GAAP guidance,” (see instructions.) I pointed you to SOP 93-7 and SFAS 86 for your discussion. Most of you did a good job relating the particular guidance to your position.

• Some letters used the expression “capitalize over an 18-month (or 24-month) period.” One capitalizes at a point in time, but amortizes over a period of time. Others indicated that it was inappropriate for all of the costs (both the marketing and the software development costs) to be capitalized s. Guidance does not support that statement. It is arguably more true in the case of the subscription advertising costs. In the software development cost situation, however, some capitalization was appropriate. (I’ve already indicated that in an earlier point.”

• In the preview discussion in class, I suggested that you not use the personal pronouns “I”. and “you.” It is more objective to use “we” or “our firm” to state a position and to use “AOL” when referring to actions of the client. This allows the writer to speak objectively from the point of view of the firm and to remove the accusatory sense of “you did something wrong.”

• Some of you are still battling wordiness and unclear descriptions. I recommend that you read your document out loud to get a sense of how it “reads.”

• Final note: When referring to a period of time as an adjective, it needs to be hyphenated. So five-year amortization period. This was a common error.