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This article seems incorrect. Oath is Yahoo + AOL. Goodwill (https://en.wikipedia.org/wiki/Goodwill_(accounting) https://en.wikipedia.org/wiki/Goodwill_(accoun

This article seems incorrect. Oath is Yahoo + AOL. Goodwill (https://en.wikipedia.org/wiki/Goodwill_(accounting) https://en.wikipedia.org/wiki/Goodwill_(accounting)) is the amount you paid for an acquistion, above and beyond the fair-market book value of a company. Just per the article, AOL was $4.4B and Yahoo was $4.5B. Now, just ignoring any tuck in acquisitions that Oath has made as a unit (presumably goodwill being rolled up under it), you have $9.9B in acquisition costs with $4.8B in goodwill initially. They are just saying they overpaid by $4.6B, and it's now worth $5.3B. If any CPAs are out there would love to know if my interpretation is right.

paulcole 8y ago
Reading the first sentence of the article would’ve cleared that up: > Only a year and a half after it built Oath from the assets of the communications giants Yahoo and AOL, Verizon now says they're virtually worthless.
- Bartweiss 8y ago
  Regardless of anything else about the brands, that sentence is certainly wrong. It pretty much just reads "this was written by a reporter without a financial background". The one thing that definitely isn't worthless here is "the assets of the communications giants Yahoo and AOL". Those are worth $5B, as noted further down in the article. Verizon has written down almost all of the goodwill value of Oath - which despite the name is not brand equity or consumer loyalty, but the collected sum of a company's non-asset value. The discussion above is about whether it's fair to describe a division as 'worthless' when its assets are still quite valuable and its operations were not so much valueless as grossly overestimated. A lede which introduces the topic while horribly misusing the term 'assets' doesn't have much bearing on that.
deleted 8y ago
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deckar01 8y ago
> Verizon said in the filing Tuesday that it last assessed the Oath brand's goodwill at $4.8 billion. Writing off $4.6 billion of that means Verizon now values Oath — including AOL and Yahoo subsidiaries like Yahoo.com, AOL.com, the Huffington Post, MSN and TechCrunch — at just $200 million on paper. They are saying the value the brand adds to the underlying assets (goodwill) is really 4% of what they originally paid. The brand is relatively worthless.
- treis 8y ago
  Goodwill isn't the value of the brand. It's just an accounting term to account for the difference in book value and purchase price. Goodwill is basically everything valuable about a company that isn't reflected on their books. Things like relationships with suppliers/buyers, customer base, institutional knowledge, specialized employees, etc.
  - paulddraper 8y ago
    Why wouldn't customer base or supplier relationships be any less a part of the legitimate market valuation?
    - greglindahl 8y ago
      There are many different ways to value a company, all of them "legitimate". "Book value" is jargon that refers to a particular valuation algorithm.
    - treis 8y ago
      They're not. That's why purchase price and book value are often different. Goodwill is the difference between the two in order to make the purchaser's books make sense. Let's say you're buying a trucking firm. Their only assets are 10 trucks worth a total of one million and they have no liabilities. The book value of that firm is one million. Let's say that the firm is one of the few with the specialized knowledge required to ship radioactive waste. They make quite a bit of money so you buy them for their market value of 10 million. If we look at your books, it looks like you just spent 10 million for 1 million of assets. In other words, your company just lost 9 million dollars. Obviously that doesn't make sense. The accounting way out of that is to add in 9 million dollars of goodwill. The transaction is then 10 million for 1 million worth of trucks and 9 million worth of goodwill. So now you're paying 10 million for 10 million worth of assets and don't show a loss on your books. Say a year later due to some safety issues you lose your license to ship radioactive waste. Now the trucking company is just a regular ole trucking company and worth a lot less. So you write down the value of the goodwill so your books reflect reality and use the write down to offset profits to lower your taxes.
tptacek 8y ago
If they overvalued goodwill and are now restating it, that comes out of their earnings; the overstatement costs them.
- joncrane 8y ago
  Then they are preparing for this year/quarter to be a "big bath." They are basically compressing all their bad stuff into a certain time period so that in the quarters/years immediately later, their earnings are higher than they would be otherwise.
- throwaway5752 8y ago
  It's non-cash, though. It costs them on an accounting basis only.
deleted 8y ago
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Bartweiss 8y ago
Wait, am I missing something? It seems like that's consistent with the article. I agree that goodwill is (depending on exact definition) essentially the expected value of a business in excess of its tangible assets. Verizon paid $8.9B for AOL + Yahoo. Oath has ~$5B of assets, which sets a rough minimum for purchase price: that's what you'd pay for the remains if Oath gave up and liquidated, and it was presumably a fixed cost in Verizon's initial purchase. (Less whatever AOL and Yahoo have in post-acquisition asset gain, but I can't imagine it's enormous.) Assessing Oath at $4.8B in goodwill + $5B in assets implied a modest gain in value (or perhaps more likely, tertiary acquisitions under the brand). Reassessing goodwill to $0.2B implies that Oath as a going concern is producing basically no value beyond what you'd get from selling off the computers, office space etc. Which seems pretty plausible, since it's hard to imagine e.g. Tumblr ad revenue even paying off its own operating costs.

paulcole 8y ago

Reading the first sentence of the article would’ve cleared that up: > Only a year and a half after it built Oath from the assets of the communications giants Yahoo and AOL, Verizon now says they're virtually worthless.

Bartweiss 8y ago
Regardless of anything else about the brands, that sentence is certainly wrong. It pretty much just reads "this was written by a reporter without a financial background". The one thing that definitely isn't worthless here is "the assets of the communications giants Yahoo and AOL". Those are worth $5B, as noted further down in the article. Verizon has written down almost all of the goodwill value of Oath - which despite the name is not brand equity or consumer loyalty, but the collected sum of a company's non-asset value. The discussion above is about whether it's fair to describe a division as 'worthless' when its assets are still quite valuable and its operations were not so much valueless as grossly overestimated. A lede which introduces the topic while horribly misusing the term 'assets' doesn't have much bearing on that.

deleted 8y ago

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deckar01 8y ago

> Verizon said in the filing Tuesday that it last assessed the Oath brand's goodwill at $4.8 billion. Writing off $4.6 billion of that means Verizon now values Oath — including AOL and Yahoo subsidiaries like Yahoo.com, AOL.com, the Huffington Post, MSN and TechCrunch — at just $200 million on paper. They are saying the value the brand adds to the underlying assets (goodwill) is really 4% of what they originally paid. The brand is relatively worthless.

treis 8y ago
Goodwill isn't the value of the brand. It's just an accounting term to account for the difference in book value and purchase price. Goodwill is basically everything valuable about a company that isn't reflected on their books. Things like relationships with suppliers/buyers, customer base, institutional knowledge, specialized employees, etc.
- paulddraper 8y ago
  Why wouldn't customer base or supplier relationships be any less a part of the legitimate market valuation?
  - greglindahl 8y ago
    There are many different ways to value a company, all of them "legitimate". "Book value" is jargon that refers to a particular valuation algorithm.
  - treis 8y ago
    They're not. That's why purchase price and book value are often different. Goodwill is the difference between the two in order to make the purchaser's books make sense. Let's say you're buying a trucking firm. Their only assets are 10 trucks worth a total of one million and they have no liabilities. The book value of that firm is one million. Let's say that the firm is one of the few with the specialized knowledge required to ship radioactive waste. They make quite a bit of money so you buy them for their market value of 10 million. If we look at your books, it looks like you just spent 10 million for 1 million of assets. In other words, your company just lost 9 million dollars. Obviously that doesn't make sense. The accounting way out of that is to add in 9 million dollars of goodwill. The transaction is then 10 million for 1 million worth of trucks and 9 million worth of goodwill. So now you're paying 10 million for 10 million worth of assets and don't show a loss on your books. Say a year later due to some safety issues you lose your license to ship radioactive waste. Now the trucking company is just a regular ole trucking company and worth a lot less. So you write down the value of the goodwill so your books reflect reality and use the write down to offset profits to lower your taxes.

tptacek 8y ago

If they overvalued goodwill and are now restating it, that comes out of their earnings; the overstatement costs them.

joncrane 8y ago
Then they are preparing for this year/quarter to be a "big bath." They are basically compressing all their bad stuff into a certain time period so that in the quarters/years immediately later, their earnings are higher than they would be otherwise.
throwaway5752 8y ago
It's non-cash, though. It costs them on an accounting basis only.

deleted 8y ago

[deleted]

Bartweiss 8y ago

Wait, am I missing something? It seems like that's consistent with the article. I agree that goodwill is (depending on exact definition) essentially the expected value of a business in excess of its tangible assets. Verizon paid $8.9B for AOL + Yahoo. Oath has ~$5B of assets, which sets a rough minimum for purchase price: that's what you'd pay for the remains if Oath gave up and liquidated, and it was presumably a fixed cost in Verizon's initial purchase. (Less whatever AOL and Yahoo have in post-acquisition asset gain, but I can't imagine it's enormous.) Assessing Oath at $4.8B in goodwill + $5B in assets implied a modest gain in value (or perhaps more likely, tertiary acquisitions under the brand). Reassessing goodwill to $0.2B implies that Oath as a going concern is producing basically no value beyond what you'd get from selling off the computers, office space etc. Which seems pretty plausible, since it's hard to imagine e.g. Tumblr ad revenue even paying off its own operating costs.