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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Eric who wrote (58609)	3/23/2002 6:49:52 AM
From: RetiredNow	Respond to of 77400

Hi all, here's an article on FAS 142 (dealing with Goodwill from acquisitions): marketwatch.com. I think I like this new guideline in that it forces companies to writedown goodwill, if the cumulutive cash flows from the acquisition that resulted in the goodwill no longer supports that goodwill number. Finally, the accounting of acquisitions has started to get closer to reflecting the economic reality. Some on this thread have complained that now they aren't amortizing steadily and that distorts the picture. So that's the other side of the argument. But I've always though that huge income statement losses obscure a company's value, especially when they have tremendous FCF from the acquisition. So this new ruling eliminates that distortion. In Cisco's case and the case of other tech companies, it's especially important, because the companies they acquire have technology that becomes obsolete in just a few years. So amortizing the goodwill from those acquisitions over 40 years would have been sheer lunacy. Comments are welcome.