What the Accountants Should Have Done and Didn't
Dot-coms were desperate for sales to sustain their high valuations, and found a way to get some. They engaged in creative accounting. Unfortunately, the accountants permitted it.
“The only way most Internet companies were showing any money on the books,” a close observer commented, “was by doing deals with one another. The business development heads would meet for lunch. They wouldn't have any idea what the outcome of the meeting would be, but they'd work it out at lunch, and then they'd both show some revenue. But it wasn't real revenue.”[82]
So the income statements of dot-coms filled up not with real sales, but with exchanges of services from each other, which each company booked as sales. Accountants ...
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