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Goodwill and Amortization Charges
Investing Lesson 4 - Analyzing an Income Statement
 More of this Feature

• Introduction
• Income Statement
• Revenue / sales
• Cost of Goods Sold
• Gross profit
• Gross margin
• The first three lines
• Operating Expenses
• R&D Expense
• SG&A Expense
• Goodwill Charges
• Extraordinary Events
• Accounting for extraordinary events
• Oper. income/margin
• Interest income and expense
• Interest coverage ratio
• Depreciation expense
• Accum. Depreciation
• Straight-line Method
• Accelerated and Sum of the Years' Digits Method
• Dbl Declining Balance
• Comparing Depr. Mths
• EBITDA
• Income taxes
• Minority Interests - cost, equity, and consolidated methods
• Unreported earnings
• Continuing operations
• Accounting changes
• Preferred dividends
• Net income applicable to common shares
• Net profit margin
• Basic vs. Diluted EPS
• Hiding share dilution
• Share repurchases
• Return on Equity- ROE
• Asset turnover
• Return on Assets- ROA
• Projecting earnings
• Formulas & Calculations
• Putting it together

• Segment 2

 Related Resources
• Investing Lesson 1
• Investing Lesson 2
• Investing Lesson 3
• More Lessons
 From Other Guides
• Goodwill on the Balance Sheet
• Goodwill Amortization Tables 
 Elsewhere on the Web
• Goodwill's Real Value
• Goodwill Amortization Charges Fireworks
• Purchase and Pooling Goodwill Amortization Headaches

Goodwill and other Intangible Asset Amortization Charges
In the past, companies were required to charge a portion of goodwill to the income statement, reducing reported earnings. For all good purposes, these charges were ignored by the investor. In June 2001, the Financial Accounting Standards Board (FASB) [the folks who make accounting rules in the United States], changed the guidelines, no longer requiring companies to take these amortization charges. If the company, through cash-flow analysis and other means, determines that the goodwill is impaired [meaning it’s not worth the value it’s carried at on the balance sheet], management will announce a write-down and reducing the carrying value of the goodwill. Intangible assets that do not have indefinite lives [such as patents] will continue to be amortized.

The complexities of goodwill and goodwill amortization charges were explained in detail in the Goodwill section of Lesson 3: Part 23.

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