Even the age-old practice of bartering is looking a lot different after Enron.
Barter, that long-standing tradition of cash-free exchange of goods and services, has awakened regulators worried about accounting fraud. Partly in response to the current climate of corporate malfeasance, the SEC has started to increase its scrutiny of barter transactions.
Companies that barter risk SEC action when they exchange goods and services at a price well above fair market value and when the goods received go unused or unsold. Either scenario paints a picture of bartering solely for a revenue boost, a legal no-no for public companies. Adrienne Miller, the SEC enforcement accountant in San Francisco, cites an egregious example whereby a company unloaded obsolete inventory for Internet advertising credits it never used. "It was an accounting gimmick to avoid writing the inventory off as a loss," Miller says.
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