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Technology Stocks : All About Sun Microsystems
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To: JDN who wrote (48445)4/20/2002 9:53:46 PM
From: Charles Tutt  Read Replies (3) of 64865
 
Let me walk through this -- we might be in total agreement.

Let's say company A acquires company B for x dollars. The goodwill that appears on company A's books as a result is x-b, where b is the book value of company B. That b is a somewhat arbitrary value, determined by such things as depreciation schedules, and (unlikely) might or (probably) might not represent the true value of B's assets, either as a going concern or in liquidation (but it can't represent both, assuming they differ). Because b is arbitrary, x-b (the goodwill of which we spoke) is also arbitrary, even if x is known to the penny. If the true value of the assets purchased is x, then there shouldn't even be any "goodwill" in theory. Unfortunately, that's not how bookkeeping treats it.

So yes, either way we've got an arbitrary number.

I say pay (little or) no attention to it.

JMHO.

Charles Tutt (SM)
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