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Goodwill - The Ultimate Scam in Something for Nothing

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January 23, 2009 – Comments (5)

Most financial reports that I read that have goodwill give me serious problems in accepting them.  Goodwill should be renamed Fudge Factor Gone Crazy.  In too many reports I see earnings based on this goodwill nonsense, and then losses as it returns to the nothing that it came from.

Mish has one line in this post, "Goodwill charges are popping up everywhere, and will continue to do so."  

Someone poisoned the fudge.

 

5 Comments – Post Your Own

#1) On January 23, 2009 at 12:54 PM, FleaBagger (29.46) wrote:

It's been months now that I've zeroed the goodwill line on balance sheets when valuing a company. In fact, I think it was one of your blog posts that convinced me to do that. Thanks!

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#2) On January 23, 2009 at 1:19 PM, djemonk (< 20) wrote:

I've started subtracting the goodwill line, as well.  I thought it was mainly a line item to account for buying another company at higher than its book value, where goodwill was the difference.

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#3) On January 23, 2009 at 1:40 PM, stockcommander (99.05) wrote:

A company buys a company that has bought a company.

Goodwill will suddenly look like "real" value on the balance sheet

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#4) On January 23, 2009 at 4:48 PM, Tastylunch (29.20) wrote:

Ha true, I've never seen anyone writedown "badwill".

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#5) On January 26, 2009 at 9:58 AM, JakilaTheHun (99.94) wrote:

I normally write-down "Goodwill" to 0 whenever I analyze a company.  It's not a real, tangible asset, so I don't see any reason to count it.  I understand why accountants use it, but when valuing a company, it really serves no useful function.  A company with a large amount of goodwill might simply be a company that likes to overpay a lot when acquiring other companies.

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