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To: jeffbas who wrote (5229)	11/1/1998 8:47:00 AM
From: Stewart Whitman	Respond to of 78567

> If it is true of a software company, as Jim agrees, why isn't it > true of most technology companies where the products are obsolete > well before 10 years -- like chip companies for example? I was told by a couple of CFOs that the IRS and company auditors don't like to see capitalized software development resulting from work done by employees. If companies decide to capitalize, the CFOs prefer that those costs come from work done by outside contractors and consultants - abundant in the software industry, but not so much in the semiconductor industry. It is somewhat of a judgement call whether you should capitalize or expense these costs. As far as amortizing capitalized software development costs, I believe that most companies use a period of less than 30/40 years. I believe 5 years is typical. Of course, the period should be the useful life of the project or technology. Stew

To: jeffbas who wrote (5229)	11/1/1998 9:47:00 AM
From: cfimx	Read Replies (1) \| Respond to of 78567

Jeff, regarding the goodwill on TMO. Any acquirer who would buy the whole thing isn't going to calculate the earnings AFTER deducting amortization charges be they 40 year or 10. He is going to look at the PRE TAX cash flow, what's left after real R & D, SG & A and maint cap ex. He then will try and figure out what MULTIPLE of that figure will give him a decent return on his outlay, over time. He will also look at the balance sheet for assets that could be sold off or used to REDUCE his purchase price, dollar for dollar. Again, he will COMPLETELY disregard the amortization charges because they don't effect his CASH return on investment. You should do the same. If you want more conviction about it, take a look at the Berkshire Hathaway Owners Manual published on the WEB site. It will say the same thing.