Acquisition Marketplace Review - The Journal of Applied M & A Theory

MoneySoft Software and The New Goodwill Rules

Statements of Financial Accounting Standards (SFAS) 141 and 142 eliminate the amortization of purchase goodwill but allow the amortization of identifiable intangibles. For more information see The FASB May Add Spark to Lackluster M&A Market

A number of MoneySoft's customers have called to find out how the adoption of SFAS 141 and 142 affects the deal structuring section of Buy-Out Plan®, Buy-Out Plan Professional Advisor and DealSense™?

The existing approach used in these programs was designed to provide the user with flexibility and does not impose a "forced" amortization period. For that reason, MoneySoft's acquisition analysis and planning programs can handle the new 141 and 142 Statements without the need for a patch.

In the Acquisition Structure | Asset Allocation screen, the user enters the amount of any identifiable Intangibles on the Intangibles line. The remaining intangibles will be automatically allocated to Goodwill. Then in the Post-Acquisition Assumptions | Miscellaneous Assumptions screen; the user should enter a 0 for the number of years over which to amortize Goodwill and then enter the applicable number of years for the other, identifiable Intangibles. With these settings, goodwill will remain on the balance sheet and will not be amortized, while the other Intangibles will be amortized to expense on a straight-line basis over the indicate number of years.

Some users have inquired about the programs' ability to write down any Goodwill that has become impaired in future periods. Because Goodwill is not written down until it has become impaired, there is no automatic function to reduce the Goodwill included in the financial projections.

By Matthew Shipley
Senior Product Specialist
MoneySoft, Inc.
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