Lies, Damned Lies, and Accounting

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Have you heard the one about the businessperson who was
hiring an accountant and asked every candidate for the result of 2 + 2? The
accountant who got the job was the one who answered, “What do you want it to

I remembered that joke when I read Michael J. De La Merced’s DealBook blog
post in the NY Times titled: “Abracadabra! Magic Trumps Math at Web Start-Ups.” Here’s the

“Over a decade ago, Internet companies promoted new ways to measure their
business performance, introducing concepts like “eyeballs” and “mindshare” to
investors. Now the latest wave of Internet start-ups are adding their own
particular yardsticks to the valuation vocabulary. Try “Acsoi” — a metric so new
that there’s no agreement on how to pronounce it. Depending on whom you ask,
it’s either “ack-soy” or “ack-swa.” Short for “adjusted consolidated segment
operating income,” Acsoi is one of three yardsticks that Groupon, the online
coupon giant, recommends investors use to determine how it is performing. It is
essentially operating profit minus the company’s large online marketing and
acquisition expenses — a highly nonstandard approach that had many scratching
their heads. Yet without it, Groupon would appear steeped in red ink.”

Now, I understand that some lying is necessary to oil the gears of social
interaction. When Mrs. Barnhart comes up to you at the church supper and asks
what you thought of her casserole, it’s best not to use accurate phrases like
“gag a goat” when answering. But that’s not what DealBook is describing.

We’re not talking about well-oiled social interaction with these accounting
tricks. We’re talking about deception and that usually ends badly. We’re talking
about telling investors that a company is doing well when that company is not.

Remember Enron? First there was a little fudging to make the numbers for the
quarter look good. Then lying became a habit, only we didn’t call it lying, we
referred to off-balance-sheet entities instead. But it was a deception.

You can apply fancy names to it or defend the practices because it uses
Generally Accepted Accounting Principles, but it’s still lying. And it’s still

Boss’s Bottom Line

Deception corrodes the fabric of trust in social situations and in business.
It’s hard to get anything done when you can’t believe what you’re being told.

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