Originally Posted by Kumabjorn
Can\t they do that just to lower their corporate taxes?
The Tax Police would be "suspicious" if they did it *just* for that. And goodwill paper losses get scrutinized as a matter of principle.
It is not uncommon for mergers and acquisitions to result in significant paper losses because market conditions do change and by the time the deals are completed, the new property has declined in value. Plus, most mergers come at a premium over the true value of the property. Some are just more painful than others. It's all part of the "game".
But yes, those big writedowns are applied to the tax bill to a certain extent.
As a rule, companies take those "goodwill losses" in chunks, spread over time, but MS prefers to take their medicine at once. When they screw up that way they don't bother trying to sugarcoat it.