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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 198.12-5.2%Dec 17 3:59 PM EST
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To: Goutam who wrote (21168)11/30/2000 9:23:39 PM
From: brushwudRead Replies (3) of 275872
 
Goodwill exists in an accounting sense in the absence of any tax consequences. When one company buys another for cash and pays more than book value, it transfers all of the other company's assets & liabilities to its own balance sheet and books the excess as an intangible asset known as goodwill. If an acquisition is done on a pooling-of-interests basis, the assets & liabilities of both companies are pooled, but since there is no cash paid, there is no excess over book value, and hence no goodwill created.

I would expect that most high-tech mergers are done as poolings-of-interests and also that Intel has done such transactions.

The concept of FMV (fair market value) has nothing to do with any of this, although the price paid for an acquisition, whether in cash or stock, may be considered by definition to be the "fair market value" at that moment.

Goodwill is a valid cost of business and is tax-deductible, but must be amortized and written off over many years. Under some circumstances, and according to tax rules I don't understand, some portion of goodwill may be construed as in-process R & D and expensed immediately, kind of like accelerated depreciation.
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