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A challenging online auction accounting question

Hi Everyone:

I have few questions regarding setting up this situation in QuickBooks.

This particular company "holds" online auction sites and is organized as follows:

(1) The said holding company owns and operates a website (WEBSITE A) that promotes both the company itself and three auction websites, each have their own domains.

(2) These particular auction sites are the ones that create revenue. (WEBSITES B, C, & D)

(4) This holding company uses off site payment fulfillment sites like PayPal, WorldPay...etc...to collect fees and commissions from its sellers. (The holding company's biz model is very similar to eBay's except that it owns multiple sites with each having its own unique domain name)

OK, my questions are:

WEBSITE A would most likely be regarded as a advertising expense and its domain name a non-amortizable intangible asset. That is simple enough.

But, how would the other web sites (WEBSITES B, C, & D) which actually create revenues be categorized? Their domain names, again, would be treated as non-amortizable intangible assets. The company that host them a re-occurring expense... But what about the websites themselves? Would they too be considered as an intangible assets? Or would they be classified as some form of income/revenue producing assets?

How would PayPal, WorldPay be classified since they are an "off site" payment service? Would they be treated as a bank or merchant service and be classified as an expense that is subtracted from the gross receipts from the auction websites? Or...could I just treat the NET proceeds from PayPal & WorldPay as GROSS income for the holding company itself?

Any advice or insights on this would be sincerely appreciated.

Thanks

Pete

Reply to
Pete J. Ahacich
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I suppose the domain name can be considered an intangible, but it WOULD be amortized over the period for which it was secured. So, if you pay, in simple terms, $100 for a domain name for a period of 5 years (at which time you would renew), then the expense (the amortization) would be $20 per year. Personally, I'd probably treat whatever is paid for the domain name as a prepaid expense.

If you are treating the domain name as an intangible, its value would be whatever was paid for the domain name and would be amortized. If you pay a host, then it would be an expense. The website ITSELF would not be considered an asset; however, revenues generated would be revenues and expenses incurred would be expenses.

Generally, an off-site payment service fees are classified as fees of some sort and expensed. These would be an operating (administrative) expense, so should be subtracted separately after gross margin is calculated.

Reply to
Beverly

Thanks Beverly!

I will go the prepaid expense route for the domain names and hosting. If the domain names gain significant recognition by the public, then I might consider changing them to intangibles.

Take care

Reply to
Pete J. Ahacich

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