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They are basically doing a clean up of their balance sheet. Those old WB shows still had value. So they were an asset in the balance sheet. Long lived assets
by IG_Semmelweiss 4y ago
They are basically doing a clean up of their balance sheet.
Those old WB shows still had value. So they were an asset in the balance sheet. Long lived assets /intangible assets usually have a long life, something like 40 years, and the clock would have started from the moment that remastered show was created.
These costs would have been hitting the income line as amorrization costs for many many years. Making their EPS look worse than it should.
Still, I question the logic, because you can write down an impaired asset without actually retiring it from service. Some beancounter somewhere had the bright idea to write down the asset to improve the balance sheet and P&L... But that should not mean you pull the shows out of circulation, andbecause they are barely driving any traffic, they have a solid accountinh argument for saying that their economic value is zero.
If a car has fully amortized but it still works, you probably dont stop driving it!
- ThunderSizzle 4y agoIt's better for a business to have expenses in depreciation and amortization because it lowers the tax burden on a cash cost that's typically already been paid years before. I would love an in-depth review on why this move is smart or not.
- IG_Semmelweiss 4y agoThe question is do you lower taxes today a great deal ( a write off) or do you little by little via amortization. Ita quite common for companies to shed garbage and bad deals during acquisitions by booking writedowns (sometimes they are even used to hide fraud)... whats unusual in this case is that they are using the deal not ho hide fraud, but to hide good remastered shows they would rather not explain as a writeoff to anyone looking at their financials. Right now its open season to shed stuff and they are killing good shows in the process. Its like killing a perfectly healthy child during wartime...because you have too mouths to feed and hes not a particular cute child.