4 ms·

> If you "depreciated" Slack's sales and marketing costs over the LTV of the average customer... This is starting to sound very similar to mark-to-market acco

> If you "depreciated" Slack's sales and marketing costs over the LTV of the average customer... This is starting to sound very similar to mark-to-market accounting, and the one word associated with "mark-to-market" is "Enron". From http://www.creditpulse.com/accountingfinance/lessons-enron/enron-lesson-no-1-mark-market-fair-value-accounting http://www.creditpulse.com/accountingfinance/lessons-enron/e... > Basically, mark-to-market is a type of accounting that enables a company to book the value of an asset or a liability, not based on the cost of that asset, but based on current market valuations or perceived changes in market valuations. What got Enron started down the path to ruin is the SEC granted them a waiver where they could start pricing their projects by their perceived value. Problem was, the perceived value was anything that Enron said it was. So that let Enron inflate their holdings, which gave them access to more capital, which let them keep on inflating their holdings until the whole thing came crashing down. Of course, the asset values weren't just what Enron said they were. They had auditors backing up their claims. One of the Big 5 financial auditors. And as a result, Arthur Anderson also went down in flames along with Enron. So, in your case, who decides what the LTV of customer cash flows is? The Enron lesson is let speculators use their hunches to guess the future, but keep that speculation out of the official accounting documents.

robhunter 7y ago
Well, just like there are objective levels of depreciation for certain classes of assets (property vs. equipment), perhaps there could be similar levels of depreciation allowable for sales & marketing costs based on historic customer churn?
- fjp 7y ago
  The property and equipment depreciation rates are codified in US tax law.
a13n 7y ago
LTV isn't some fluffy made up number, it's the output of a formula
- defen 7y ago
  But you don't actually know that a customer will remain a customer forever, whereas you do know that a truck will be worth 15% of its present value in 10 years.
  - jsmeaton 7y ago
    Averaged out across all customers you kind of do though. You know the rate coming in and the rate leaving.
austenallred 7y ago
> This is starting to sound very similar to mark-to-market accounting, and the one word associated with "mark-to-market" is "Enron". From Wikipedia: Mark-to-market (MTM or M2M) or fair value accounting refers to accounting for the "fair value" of an asset or liability based on the current market price, or the price for similar assets and liabilities, or based on another objectively assessed "fair" value.[1] Fair value accounting has been a part of Generally Accepted Accounting Principles (GAAP) in the United States since the early 1990s, and is now regarded as the "gold standard" in some circles.
Danieru 7y ago
What you are describing is Mark to Model not Mark to Market. Mark to Market is what banks use and has little room for cheating. Mark to Model was banned after Enron.

robhunter 7y ago

Well, just like there are objective levels of depreciation for certain classes of assets (property vs. equipment), perhaps there could be similar levels of depreciation allowable for sales & marketing costs based on historic customer churn?

fjp 7y ago
The property and equipment depreciation rates are codified in US tax law.

a13n 7y ago

LTV isn't some fluffy made up number, it's the output of a formula

defen 7y ago
But you don't actually know that a customer will remain a customer forever, whereas you do know that a truck will be worth 15% of its present value in 10 years.
- jsmeaton 7y ago
  Averaged out across all customers you kind of do though. You know the rate coming in and the rate leaving.

austenallred 7y ago

> This is starting to sound very similar to mark-to-market accounting, and the one word associated with "mark-to-market" is "Enron". From Wikipedia: Mark-to-market (MTM or M2M) or fair value accounting refers to accounting for the "fair value" of an asset or liability based on the current market price, or the price for similar assets and liabilities, or based on another objectively assessed "fair" value.[1] Fair value accounting has been a part of Generally Accepted Accounting Principles (GAAP) in the United States since the early 1990s, and is now regarded as the "gold standard" in some circles.

Danieru 7y ago

What you are describing is Mark to Model not Mark to Market. Mark to Market is what banks use and has little room for cheating. Mark to Model was banned after Enron.