Volume 3, No. 7


When Seagram Met Time Warner...:  For over a year, much speculation has simmered regarding Seagram's intentions toward its investment in Time Warner stock. Whether or not Seagram moves to increase its holding is a matter of conjecture; how such a move would affect its financial reporting is a more concrete issue. If Seagram increases its Time Warner stake by another 5%, it will likely change the accounting for its investment - which would take some of the luster off of Seagram's reported earnings per share due to the amortization of goodwill. The resulting charges could reduce Seagram's EPS by 6%. There is a pivotal issue in determining the accounting treatment: the matter of "significant influence". Should Seagram attempt to obtain a board seat, its success - or lack of success - will provide a good measure of significant influence.

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