Fair Trade
Even the age-old practice of bartering is looking a lot different after Enron.
By Julie Monahan •
Opinions expressed by Entrepreneur contributors are their own.
Barter, that long-standing tradition of cash-free exchange ofgoods and services, has awakened regulators worried aboutaccounting fraud. Partly in response to the current climate ofcorporate malfeasance, the SEC has started to increase its scrutinyof barter transactions.
Companies that barter risk SEC action when they exchange goodsand services at a price well above fair market value and when thegoods received go unused or unsold. Either scenario paints apicture of bartering solely for a revenue boost, a legal no-no forpublic companies. Adrienne Miller, the SEC enforcement accountantin San Francisco, cites an egregious example whereby a companyunloaded obsolete inventory for Internet advertising credits itnever used. "It was an accounting gimmick to avoid writing theinventory off as a loss," Miller says.
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