4 ms·
This seems like a non-story. Lets say a company buys another company for its SAAS product, customers and revenue. GAAP rules state that anything paid above "bo
by asmithmd1 10y ago
This seems like a non-story.
Lets say a company buys another company for its SAAS product, customers and revenue. GAAP rules state that anything paid above "book value" for the company must be called "good will" and be depreciated. This might have made sense in a world where the value of a company was the equipment it owned and the value in a brand name but doesn't make as much sense for a SAAS company. That is why companies are often valued on "EBITDA" - earnings before interest, taxes, depreciation, and amortization
- kgwgk 10y ago> GAAP rules state that anything paid above "book value" for the company must be called "good will" and be depreciated. Goodwill is not subject to amortization since 2001 (depreciation is the term for tangible assets, amortization for intangible assets). It has to be tested for impairment, though. For example, HP bought Autonomy for $11.1bn in 2011 and took an impairment charge of $8.8bn in 2012 (the goodwill and a good chunk of the book value as well).