No prob, one step at a time it is.
CSCO does an acquisition, there's an immediate writedown. Where does this writedown show up? Is it on the income statement?
It does indeed show up on the income statement. Just make sure you're looking at the right income statement, the GAAP net income statement. For example, go back to the last quarter where Cisco was still doing acquisitions, the 3Q 2001. During that quarter, CSCO wrote off in-process R&D of $237mm which directly affected the bottom line during the quarter. Using NT's method of accounting, this $237mm would be included as an intangible asset to be written down over the next 40 years.
f I put this and previous statement together, I see that CSCO has an immediate writedown of the ASSET (no goodwill shows up on the balance sheet), but no effect on INCOME.
No, the asset write down does indeed affect net income. It is the 'extraordinary' charge that somehow happened each quarter for Cisco. Once again, though, make sure you are looking at the GAAP number, the one that all the Wall Street analysts ignore. |
