RogerBW's Blog

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So instead you sit on the rights and leave the things unpublished, keep them on the books at their theoretical value, and let the author be even more comprehensively forgotten.