Volume 3, No. 9

 

Goodwill: Maybe A Meltdown:  For years, goodwill has been clogging the balance sheets of acquisition-happy companies and reverse leveraged buyouts. A new FASB standard to be delivered later this year should force companies with lingering goodwill balances to take a more critical view of those intangible assets, consistent with the SEC's recent posture on goodwill writeoffs. While goodwill writeoffs were increasingly common in 1993, writeoffs under the new standard may prove to be more drastic due to a required present value methodology. While companies may be able to effectively circumvent the prescriptions of the new standard, analysts nevertheless ought to be concerned with the economic value of the goodwill - which they can test themselves.

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