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Technology Stocks : Gemstar Intl (GMST) -- Ignore unavailable to you. Want to Upgrade?

To: NY Stew who wrote (3688)	8/17/2000 6:37:15 PM
From: A.L. Reagan	Respond to of 6516

Another consideration going forward (of which I am again not schooled) is the likely favorable tax consequences of Goodwill amortization. WARNING Boring accounting and tax post follows. GAAP pooling versus purchase and tax accounting are too entirely different animals. For tax purposes, pure goodwill amortization is not a deductible creature, but a basis adjustment. In tax "purchase" accounting the fair market value of the acquired assets and liabilities are determined. Any excess consideration (call it goodwill) is not an amortizable asset. However, items such as patents, trademarks, servicemarks, customer lists, subscription lists, etc. which are defined intangible assets have values placed on them and are amortized for tax purposes. So the trick in tax accounting is to have as little "goodwill" left as possible. Items such as fixed assets are stepped-up, if justifiable, to their fair market values. In the tax equivalent of "pooling" the tax bases of the assets and liabilities transfer over. Because there can be significant differences in tax versus book treatment of acquisitions, this gives rise to lots of timing differences on the balance sheet and subsequent cash flows. In the instance of TVGIA, one hopes the clever tax johnnies have allocated as much as possible to those intangible assets which qualify for periodic amortization, so I would agree with your general premise. Snooze...