RogerBW's Blog

How accounting rules distort real life 22 November 2014

Accounting rules have perverse effects on real life. Here's an example dear to my heart.

Let's say you're a publisher, and among the rights you own are those to the work of an author who was big in the fifties and sixties, but who has since died, and whose works have been out of print for a while. You might think you'd bring those books out again, maybe not in print because that needs a big investment that you might not recoup if you only reach a small audience of aging fans, but maybe in etext?

Here's why you might not. Those rights have a monetary value, which was set when you acquired them (maybe as part of the assets of another company that you bought for entirely different reasons), and that's part of the assets listed in your accounts. If you'd bought a building or a printing press, there would be rules for automatically adjusting the value it had in your list of assets over time, because it's not too hard to work out a fair market price for things like that; but in the case of publication rights that are sitting unused, there's no way of re-valuing them until an actual publication happens, so they still have the nominal value they had when you acquired them.

But that was a while ago, when that author was a bit better-known and more of his fans were alive. If you bring the books out again now, and sales aren't as high as they would have been then – which obviously they won't be, because the only new fans these days are people who've been lent the books by the old ones – you'll have to re-value the rights, because they'll be worth less than they used to be.

And that means your accounts will show a loss, just the same as if you'd actually lost something real. Which makes your overall profitability less than it otherwise would be, the value of the company if you sell it is lower, and so on.

So instead you sit on the rights and leave the things unpublished, keep them on the books at their theoretical value, and let the author be even more comprehensively forgotten.

Comments on this post are now closed. If you have particular grounds for adding a late comment, comment on a more recent post quoting the URL of this one.

Search
Archive
Tags 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s 3d printing action aeronautics aikakirja anecdote animation anime army astronomy audio tech base commerce battletech beer boardgaming bookmonth chain of command children chronicle church of no redeeming virtues cold war comedy computing contemporary cornish smuggler cosmic encounter coup cycling dead of winter doctor who documentary drama driving drone ecchi economics espionage essen 2015 essen 2016 essen 2017 essen 2018 existential risk falklands war fandom fantasy film firefly first world war flash point food garmin drive gazebo geodata gin gurps gurps 101 harpoon historical history horror hugo 2014 hugo 2015 hugo 2016 hugo 2017 hugo 2018 hugo-nebula reread in brief avoid instrumented life kickstarter learn to play leaving earth linux mecha museum mystery naval non-fiction one for the brow opera perl photography podcast politics powers prediction privacy project woolsack pyracantha quantum rail ranting raspberry pi reading reading boardgames social real life restaurant reviews romance rpg a day rpgs science fiction scythe second world war security shipwreck simutrans smartphone south atlantic war squaddies stationery steampunk stuarts suburbia superheroes suspense television the resistance thirsty meeples thriller tin soldier torg toys trailers travel vietnam war war wargaming weather wives and sweethearts writing about writing x-wing young adult
Special All book reviews, All film reviews
Produced by aikakirja v0.1