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Hi Everyone
I wanted to share something with you guys regarding leasing then purchasing a high value domain. You might already know this but I think its a good thing to know and understand because I sure didn't.
I work for a company that had leased its domain name for 10 years then recently purchased it. We have been expensing the monthly payment for the domain name as an advertising expense. When we purchased the domain last month, I asked our CPA's if we could put the value of the domain on our books as an Asset. In my opinion the name is probably worth at least $1 million. Here is what the accountant said.
"I understand these domain names can be very valuable, unfortunately GAAP (Generally Accepted Accounting Principals) usually doesn't allow you to record the actual "market" value of intangible assets above the cost you've incurred to paid for it.... I'm sure the "domain name" has a much higher market value than you actually paid to acquire it, but GAAP won't allow you to record that unrealized gain unfortunately."
"It's somewhat like accounting for real estate, such as a building. Even though you may have acquired the building, you are only allowed (for GAAP) to record the asset at the historical amount it cost you to acquire it, regardless of whether the market value increases."
"Since all of the amounts paid to acquire the ownership of the domain name has been written off as expense in prior years (i.e. similar to depreciation), it would not be appropriate to now, record the assets on the books."
So I hope this helps everyone understand a little bit of the accounting side of high price domains. I wish I owned such a domain but . . .some day eh!
I wanted to share something with you guys regarding leasing then purchasing a high value domain. You might already know this but I think its a good thing to know and understand because I sure didn't.
I work for a company that had leased its domain name for 10 years then recently purchased it. We have been expensing the monthly payment for the domain name as an advertising expense. When we purchased the domain last month, I asked our CPA's if we could put the value of the domain on our books as an Asset. In my opinion the name is probably worth at least $1 million. Here is what the accountant said.
"I understand these domain names can be very valuable, unfortunately GAAP (Generally Accepted Accounting Principals) usually doesn't allow you to record the actual "market" value of intangible assets above the cost you've incurred to paid for it.... I'm sure the "domain name" has a much higher market value than you actually paid to acquire it, but GAAP won't allow you to record that unrealized gain unfortunately."
"It's somewhat like accounting for real estate, such as a building. Even though you may have acquired the building, you are only allowed (for GAAP) to record the asset at the historical amount it cost you to acquire it, regardless of whether the market value increases."
"Since all of the amounts paid to acquire the ownership of the domain name has been written off as expense in prior years (i.e. similar to depreciation), it would not be appropriate to now, record the assets on the books."
So I hope this helps everyone understand a little bit of the accounting side of high price domains. I wish I owned such a domain but . . .some day eh!
