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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