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Technology Stocks : All About Sun Microsystems
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To: Charles Tutt who wrote (48398)4/19/2002 1:53:40 AM
From: QwikSand  Read Replies (1) of 64865
 
I was just looking at the February SUNW 10-Q (it's the most recent one, I don't know when they file for the quarter they just reported on today) and saw this in a note:

On July 1, 2001, we early adopted SFAS 142. In accordance with SFAS 142, goodwill is no longer amortized. There was no impairment of goodwill upon adoption of SFAS 142. We are required to perform goodwill impairment tests on an annual basis, and on an interim basis in certain circumstances. There can be no assurance that future goodwill impairments tests will not result in a charge to earnings. (Emphasis added.)

Now I notice that as of this filing they're carrying nearly $2.2B of goodwill as an asset on the balance sheet.

This is where my utter ignorance of accounting comes into play: I don't know how concerned to be about this or whether to be concerned at all. Maybe earnings looked a little better because some amortization expense went away, but so what. The main issue seems to be that this $2.2B asset represents close to 22% of shareholder's equity ($9.9B). Do we wake up one morning to discover they've "impaired" this asset and lopped some big chunk of book value off the shares? How is this goodwill thing going to work from now on?

Charles maybe you or somebody who knows something about accounting can address this question.

Thanks.
--QS

Edit: Did they by any chance knock off some of this goodwill today? I didn't listen to the CC.
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