In the Midst of a Merger, Lycos Looks to the Books

SAN FRANCISCO -- As if the reaction of Lycos (LCOS Quote) investors to its proposed merger with USA Networks (USAI Quote) wasn't enough, now Lycos has a potential accounting problem on its hands.

Numbers disclosed in documents that the Internet outfit filed in its proposed merger with Wired Ventures suggest that the Securities and Exchange Commission is taking a hard look at how Lycos has been accounting for the in-process research-and-development costs of Lycos' acquisitions in 1998, such as Tripod and WhoWhere.

In-process R&D is an arcane but quarrelsome issue between tech companies and regulators these days. Tech companies are increasingly buying smaller companies with great promise but little book value. The premium they pay to book value can either be amortized over a number of years -- dragging down earnings in the process -- or written off as a one-time charge of R&D projects in development. ...