1. It has become increasingly popular for Internet companies to enter into transactions in which they exchange rights to place advertisements on each others ' web sites. In some of these transactions, no cash is exchanged between the parties. In other transactions, similar amounts of cash are exchanged between the two parties. Some entities record an equal amount of revenue (for the web space they own and "sell") and expense (for the web space they "purchase " from the other entity). There is no overall effect on net income or cash flows, although the timing of the revenue and expense may differ. Although this Issue is written in the context of Internet companies, it also applies to advertising barter transactions in other industries. 2. Currently, many Internet companies report net losses and net operating cash outflows and there is a belief that the market capitalization of many Internet companies is based on revenues. To the extent that revenues include barter transactions for which Copyright © 2000, Financial Accounting Standards Board Not for redistribution Page 1there is no ultimate realization in cash and no overall effect on net income, the practic
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