Thanks, HJ, for posting an interesting article that supports my point. From the article:
New accounting rules that no longer require companies to write off goodwill from past acquisitions will boost the bottom line -- at least on paper...
...For AOL, the amount is particularly significant because it could push the company into the black on a net basis for the year.
The increased earnings may look good to Main Street investors, but professionals by and large disregard the effect of the accounting change because it does not reflect any underlying change in the company's business performance.
"It doesn't really mean a thing because it does not change the value of future cash flows of the company," said Matthew Litfin, an analyst at investment bank William Blair & Co..."
The problem for the financial world, however, will be that each company is likely to treat the issue differently.
...said Mark Cheffers, ..."There's a great amount of leeway in how the write-off of goodwill can be reported."
The new accounting rules may come back to bite the companies that now are using them to boost earnings...
"There's no economic impact, but once people start focusing on the new numbers, that could help some of these banks that are seeing a big boost in numbers, on a valuation basis," said Putnam Lovell Securities analyst Jennifer Thompson.
So, which is "meaningless bullshit"? Cash flow/EBITDA or reported earnings? |
