04/15/96 TABLE: A Look at AOL's Books

A Look at AOL's Books

Until recently, AOL treated many costs of acquiring new members, including advertising, as a capital investment rather than as a current expense. 1. AOL elected to defer certain costs. 2. That allowed it to report lower total expenses. 3. The result: The company reported profits in 1993 and 1994 and a $34 million 1995 loss. Business Week asked American Securities to calculate the effect of treating all member-acquisition costs as a current expense. It found: 4. Total expenses would have been far higher. 5. There would have been losses in all three years; the 1995 loss would have been more than double the one reported. After an SEC review, AOL now capitalizes more member-acquisition expenses. A Look at AOL's Books 1993 1994 1995 TOTAL REVENUES REPORTED* $52,355 $117,496 $397,313 1 Deferred Subscriber Acquisition Expenses $3,647 $19,502 $50,837 2 Total Expenses Reported** $51,956 $114,946 $430,960 3 Total Income Reported $399 $2,550 -$33,647 4 Total Expenses Revised $55,603 $134,448 $481,797 5 Net Income Revised -$3,248 -$6,952 -$84,484 *Includes other revenues **Includes income taxes Note: Amounts are in thousands of dollars DATA: COMPANY REPORTS, AMERICAN SECURITIES