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To: Mike Buckley who wrote (38780)	2/1/2001 8:26:14 AM
From: Mike Buckley	Respond to of 54805

Don'tcha wish all companies in the financial media have the Fool's disclosure policy: fool.com --Mike Buckley

To: Mike Buckley who wrote (38780)	2/1/2001 9:20:48 AM
From: LowProle	Read Replies (1) \| Respond to of 54805

Mike: When something happens that affects the value of the good will, that line item will be lessened. I'm not an accountant, and I don't understand this part. When a purchase price is set for an acquired company, we know what the value of goodwill is pegged at. But in the succeeding years, how would we know when to "lessen" or reduce the value of the goodwill?

To: Mike Buckley who wrote (38780)	2/8/2001 5:59:10 PM
From: StockHawk	Read Replies (1) \| Respond to of 54805

>> a really important ruling by FASB (Fair Accounting Standards Board) that changes the way a company's financial statements handle acquisitions of other companies. Beginning July 1, companies will no longer be required to amortize good will... Instead, they'll have to show a separate line item on the balance sheet that identifies the current value of the good will. When something happens that affects the value of the good will, that line item will be lessened.... Needless to say (but I will anyhow), this accounting change should be of immense interest to investors in the leading high-tech companies because most if not all of them acquire other companies on a regular basis. As an extreme example of a dramatic change in a company's financial statements, Gemstar will be able to report positive earnings instead of negative earnings due to this new ruling. << Hi Mike, I'm a bit behind in reading the thread so forgive me if this has already been addressed, but I just read your post and wanted to add a bit to it. FASB (Fair Accounting Standards Board) First, it is the Financial Accounting Standards Board. Second, the issue of how to handle goodwill has been a hot topic for many years. The FASB has intended to eliminate the pooling method for some time, but due to strong opposition, new regulations have often been delayed or modified as discussions continue. Likewise, the July 2001 date referenced above may also change. Also worth noting is that the idea of not writing off goodwill unless impairment is evident is appealing to tech companies, or any companies with lots of goodwill from lots of acquisitions. The argument here is that if I buy say TV Guide, it has a valuable brand name. If I promote it properly, the value of the brand may in fact increase, rather than diminish, so why should I be writing it off each year thereby reducing my reported earnings. Of course a similar argument can be made in the case of other assets, such as real estate. Why should I be depreciating my San Diego building when real estate prices keep rising. Anyway, not being forced to amortize goodwill looked like a home run one year ago. Companies figured they would love to avoid that expense on their reported income statements. However, with the fall of the NASDAQ a new problem arises. These same companies may be forced to take even bigger writeoffs due to the impairment of goodwill. For example, lets say that a company like JDSU pays 100 million dollars for a series of acquisitons, that generate 70 million in goodwill (all numbers here are just made up for illustrative purposes). Now lets say that JDSU has a market capitalization of 200 million. Then, a bear market hits and the the value of JDSU's stock takes a dive. Now it has a market cap of just 60 million. What is the value of the goodwill. Well, if the market values the entire company, including all its goodwill at 60 million, it is an easy argument to say that the goodwill itself can not be worth 70 million. Thus writeoffs become necessary. Unlike amortization, which at least allows a even flow of the expense, taking impairment charges will cause reported income to bounce up and down. StockHawk for info on the FASB, and their work on business combinations and goodwill: rutgers.edu