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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 236.73-6.1%Jan 30 9:30 AM EST
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To: TGPTNDR who wrote (59688)10/23/2001 12:06:34 AM
From: John StopforthRead Replies (1) of 275872
 
TGPTNDR

Re:But that whole subject is so far from any expertise on my part.

You and me both, my accounting knowledge is limited.
I am sure you'll be thrilled to read (ggg), I did a
little research on the subject and came up with a
definition in a fifteen year old Canadian accounting book.

Goodwill means the present value of future earnings in excess of the earnings normally realized in the industry.

Explanation:
The existence of the intangible asset of goodwill is indicated when an entire business is sold for a price in excess of the fair market value of the other assets.
The willingness of the purchaser of a going business to pay a price greater than the sum of the values of the tangible assets indicates that he is paying for intangible assets as well. If the business does not include such specific intangibles as patents or franchises the extra amount paid is presumably for goodwill. Superior earnings in past years are of significance to a prospective purchaser of an enterprise only to the extent that he believes such earnings may continue after he acquires the business. If the prospective purchaser believes that, by purchasing a particular company with a record of superior earnings in the past, he will earn these above-average earnings in the future, he may reasonably be expected to pay a premium price for the business.
Accountants generally agree that whenever any event occurs which indicates that an intangible has lost all value,
immeditate write-off of the entire cost is warranted regardless whether an amortization program has been followed.
This is what Nortel and others have done leading to large loses.
If Intel did the same, their GAAP loses would be huge and
I don't expect investors would give such a high value to
the stock.
On the other hand, maybe Intel's goodwill is contributing
to increased revenues and they can continue to amortize
over a long period of time, up to forty years according
to the accounting book.

Sorry for flogging a dead horse.
John
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