Vonage Says Market Over-Reacted > Welcome to the end.

said by fAcEtIOUs:



»finance.yahoo.com/q/bs?s=VG

said by batterup:

I find this interesting, Negative Goodwill.

NEGATIVE GOODWILL arises where the net assets at the date of acquisition, fairly valued, exceed the cost of acquisition. It is reflected on the balance sheet net of other intangible assets. Negative goodwill is recognized as income as follows:

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To the extent that negative goodwill relates to expected future losses and expenses, it is recognized in the income statement when the future losses and expenses are recognized.
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The amount of negative goodwill relating to identifiable non-monetary assets (not exceeding the fair values of such acquired assets), is recognized as income on a systematic basis over the remaining useful lives of the identifiable acquired
depreciable/amortizable assets with a maximum of 20 years.
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The amount of the negative goodwill in excess of the fair values of the acquired identifiable non-monetary assets is recognized as income immediately.
*
The amount of the negative goodwill relating to monetary assets is recognized as income immediately

GOODWILL is that intangible possession which enables a business to continue to earn a profit that is in excess of the normal or basic rate of profit earned by other businesses of similar type. The goodwill of a business may be due to a particularly favorable location, its reputation in the community, or the quality of its employer and employees. The evidence that goodwill exists is the proven ability to earn excess profits.

Goodwill is created on the books of a newly purchased company to the extent that the purchase price of the company is greater than the value of its net tangible assets. There are a number of methods for valuing goodwill: a. Simple Capitalization - The net profit of the business is capitalized to determine the total value of the business. The value of all the tangible assets is subtracted from the total value to establish the value of the intangible assets, or goodwill. b. Excess Earnings - the amount of earnings that are in excess of those normally earned by a similar business are capitalized to determine the value of goodwill. c. Income Tax Method - The past five years net income is averaged and a reasonable expected rate of return for tangible assets and salary requirements are subtracted. The resulting value is then capitalized to arrive at the goodwill value. d. Market Value - The price a willing seller would accept and a willing buyer would pay for goodwill. e. Buy /Sell Agreement - The value of goodwill is established by a formula in the buy/ sell agreement. f. Rule of Thumb - Goodwill is worth one years gross income.