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In reference to the interview with Tom Gardner, a Motley Fool subscriber critiqued my comment that Enron inflated earnings by capitalizing (deferring) software expense. The member said, generally speaking, capitalizing software is the appropriate thing to do.

Most corporations who are not in the software business expense software expenditures on a current basis, rather than deferring them. Enron, in the year prior to its demise, incrementally capitalized a massive sum of software expense. The total amount was 10¢ a share, equal to nine percent of the company's reported $1.10 share earnings. This item alone was a major red flag that was missed by 99.9% of all of Enron's investors that read the corporation's annual report.

Thornton Oglove
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