Quote:
Originally Posted by Kumabjorn
How can anyone judge if a write off of 3 billion or 6.2 billion is justifiable? I'm thinking that when MS has the opportunity for a write off like this, they go all in to use a mangled poker phrase.
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Not hard.
The units are simply priced as a standalone business and if the book value exceeds the estimate, the difference is either carried on the books as goodwill (brand value and other intangibles) or gets written down.
A classic case is the TimeWarner merger with AOL just before the 90's internet bubble burst. It tooks years to write down all the lost value and by the final tally AOL had lost two thirds of its total *value*. TimeWarner was worth *less* after merging with AOL that it was worth without it.
http://www.time.com/time/business/ar...233436,00.html
The opposite is also true, BTW: some companies are composed of units that are individually worth more than the combined company is valued at.