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To: ANANT who wrote (3354)	9/29/1998 8:30:00 PM
From: Anthony Wong	Respond to of 11568

Bloomberg - MCI WorldCom Cuts In-Process R&D Write-Off to $3.1 Billion Bloomberg News September 29, 1998, 7:04 p.m. ET MCI WorldCom Cuts In-Process R&D Write-Off to $3.1 Billion Washington, Sept. 29 (Bloomberg) -- MCI WorldCom Inc. said it will take a $3.1 billion write-off, or about half the amount first estimated, to account for in-process research and development acquired when WorldCom Inc. bought MCI Communications Corp. earlier this month. In August, the company had estimated the R&D charge could reach as much $6 billion to $7 billion. Compared to that estimate, the lower figure would cut annual earnings down the road by about $75 million to $100 million by increasing the size of acquisition-related write-offs taken over a period of years, according to an earlier filing with the Securities and Exchange Commission. Jackson, Mississippi-based WorldCom bought MCI for $47 billion in the telecommunications industry's largest acquisition ever. In a filing today with the SEC, MCI WorldCom said that after setting the in-process R&D charge at $3.1 billion, about $26 billion of the purchase price will be recorded as goodwill, which will be amortized over 40 years. Goodwill is the premium paid over the fair value of the assets of an acquired company, and must be deducted from future earnings. The SEC has vowed to closely scrutinize company write-offs for in-process R&D, citing concern that large estimated values for research costs could inflate future earnings. Only yesterday, America Online Inc., the biggest online service, said it reached an agreement with the SEC to take charges of $70.5 million in fiscal fourth quarter research and development charges related to acquisitions of Mirabilis Ltd. and NetChannel Inc. The company had delayed disclosure of its final financial results because of talks with the SEC about the size of those write-offs. In its filing with the SEC, MCI WorldCom said its latest estimate of the R&D charge came after ''new guidance'' from the SEC, and ''reflects the views of the SEC.'' Accounting rules require companies to allocate the purchase price of a company to different assets it acquires. The cost of in-process R&D at an acquired company can be written off in full. Costs that aren't taken as an initial charge against earnings, such as goodwill, are written off over a number of years, depressing future earnings. MCI WorldCom said the estimates in today's filing represent a ''preliminary allocation.'' The company expects to set the final allocation of acquisition costs before announcing its third- quarter results, the filing said. --Siobhan Hughes in Washington (202) 624-1943, with reporting by