America Online
America Online
Description of AOL
America Online, Inc. is the world's largest Internet access provider with more than 34 million subscribers using its AOL online service. The AOL proprietary network also offers content, communications tools, and online shopping. America Online also owns CompuServe Interactive Services (about 3 million users) and has operations in 16 countries. Other operations include Netscape (browser software), Digital City (online community guide), and ICQ (instant messaging software) and the popular Win amp MP3 player. America Online is a division of media and entertainment titan AOL Time Warner.
AOL classifies its business interests into six fundamental areas consisting principally of interactive services, Web brands, Internet technologies and electronic commerce services; Cable, consisting principally of interests in cable television systems; Filmed Entertainment, consisting principally of interests in filmed entertainment and television production; Networks, consisting principally of interests in cable television and
broadcast network programming; Music, consisting principally of interests in recorded music and music publishing; and Publishing, consisting principally of interests in magazine publishing, book publishing and direct marketing.
On January 11, 2001, America Online, Inc. (America Online) and Time Warner Inc. (Time Warner) completed their previously announced merger. The combined company is named AOL Time Warner Inc. (AOL Time Warner). The financial statements of AOL Time Warner reflect the application of the purchase method of accounting. Under the purchase method of accounting, the estimated costs of approximately $147 billion to acquire Time Warner, including transaction costs, have been allocated to Time Warner's underlying net assets in proportion to their respective values. However, because the valuation of certain of Time Warner's underlying assets and liabilities continues to be refined, such allocation is subject to change
SEC Litigation Release (May 15, 2000) - Accounting for cost
AOL settles with SEC, agrees to $3.5 million fine
America online has been slapped with a cease and desist order by the U.S. Securities and Exchange Commission (SEC) and has agreed to pay a civil penalty to settle charges in the amount of $3.5 million fine. The SEC filed a complaint in U.S. District Court in Washington DC against AOL for civil penalties for improperly capitalized costs of advertising for new subscribers, and reporting those costs as an asset on its balance sheet. The SEC stated that these costs should have been treated as an expense. At issue were AOL¡¦s inaccurate financial reports from 1995 and 1996. The company reported profits instead of losses for six of eight quarters by deferring advertising costs associated with acquiring new subscribers rather than showing them as expenses.
The SEC and AOL also simultaneously settled the action. AOL agreed to pay a fine of $3.5 Million. AOL did not admit to do any wrong thing. The action and settlement do not pertain to any financial results reported by AOL FY 1997. AOL has spent heavily on direct mail advertising, including distribution of disks containing AOL software. In 1995 and 1996 AOL capitalized these costs. Although AOL did not admit fault, the SEC says the giant [next page]