The accounting fraud&#x27;s[1] the best part of the AOL CD lore.<p><pre><code>  For fiscal years 1995 and 1996, AOL capitalized most of the costs
  of acquiring new subscribers as &quot;deferred membership acquisition 
  costs&quot; (&quot;DMAC&quot;) -- including the costs associated with sending disks
  to potential customers and the fees paid to computer equipment 
  manufacturers who bundled AOL software onto their equipment -- and
  reported those costs as an asset on its balance sheet, instead of 
  expensing those costs as incurred. 
</code></pre>
The financial impact?<p><pre><code>  Had these costs been properly expensed as incurred, AOL&#x27;s 1995 reported
  pretax loss would have been increased from $21 million to $98 million 
  (including the write-off of DMAC that existed as of the end of fiscal 
  year 1994), and AOL&#x27;s 1996 reported pretax income of $62 million 
  would have been decreased to a pretax loss of $175 million.
</code></pre>
[1]<a href="https:&#x2F;&#x2F;www.sec.gov&#x2F;litigation&#x2F;admin&#x2F;34-42781.htm" rel="nofollow">https:&#x2F;&#x2F;www.sec.gov&#x2F;litigation&#x2F;admin&#x2F;34-42781.htm</a>