Berkshire Hathaway Class B Message Board

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Non-Tech : Berkshire Hathaway Class B

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To: Benkea who wrote (1299)	1/24/2000 4:57:00 PM
From: Richard Forsythe	Read Replies (1) of 1652

I think it's reference to the fact that "goodwill" (the general concept) is the difference between market value and book value. When one company buys another, the acquiree's goodwill is explicitly included in the acquirers book value. The goodwill of the acquirer is now market value less book value plus goodwill shown on the balance sheet. Under US GAAP, the goodwill on the balance sheet is slowly "pushed" into the market valuation over x years (assuming purchase accounting). Under pooling-of-interests, the goodwill is "dumped" into the market valuation immediately. In the UK (for example), the goodwill can be left on the balance sheet indefinitely (lowering ROA, but not earnings). I think WEB prefers the UK accounting method... Richard

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