CPA Forum

Dejavu anyone? Google's Q1 tax rate was 27%, and Q2 was 26%. It should be an estimated 30%. Didn't this happen last year? They had to apply a 42% tax rate in Q405 and they missed earnings. If they screw this one up, CFO should definitely be fired.

Here's a spreadsheet with analysis (includes tax rate) for the last six quarters.

These are the clowns that are estimating $2000 share target. That would give them >$650 Billion market cap. Yea, right. Click for larger image.

Q3 Earnings Press Release
Yet share price lags.

Revenue: $ 2.456B
NI (Non-GAAP): $ 772MM
EPS (diluted): $ 2.49

My EPS forecast was off 2 cents but I was way off on Revenue. Looks like Revenue/Page Views dropped. I would have thought it would have increased considering they raised minimum bid levels, but I guess low cost keyword buyers represented a chunk of their revenue.

I predicted the last earnings within 1 cent per share...I don't think I'll get so lucky this time.

Once again, Google has been gaining an incredible amount of traffic which in turn means monetization which in turn means CHA CHING. Here's the Forecast.

Summary (ex-stock based comp):
Rev $2.8B
NI $755MM
EPS $2.47 (assuming 305MM shares outstanding)

In my 23 years of life I've learned that in the long run everyone's luck is the same. It's what you do consistently to create and seize opportunities that differentiates one from another.

I love watching this show probably because I love money. However, what bugs me the most is that these people never take into account expected value; all they talk about is how much the money is, and what it can do for them...all the good for TV commentary. I mean, I guess it would be extremely boring to have some math wiz or finance/accounting guy up there talking about calculations and how the banker's offer is way lower than the expected value (and it ALWAYS is). The show's ratings would surely get killed.

But we would never think this type of situation will never be applicable to real life. Until today...

So one of our ex-clients (who shall remain nameless and bankrupt) sent us a bankruptcy settlement offer. They owe us a few grand, but they gave us the choice of either take 1) approximately 14% of the owed amount now or the full amount in eight installments (timeliness not defined and payment not guarenteed). And my boss asks me for my opinion, and this was my reply:
--
I would reject because
1) We are cash abundant
2) The amount is immaterial
3) The amount due is significantly higher (percentage wise) than the settlement offer
4) Principles.
If we take the money now, we are basically saying there is less than a 13.7% chance they will pay us the full amount (not accounting for time value).

So the big question is, Deal or No Deal?

Do we want to be like those idiots on TV who never take into account net expected value? The would hope the answer is no and: NO DEAL!
--
Not to mention we already wrote it off and the bankruptcy court they owed us the money, it was pretty much a no brainer.

Recently my employer obtained an intangible asset (a copyright to be specific) and I had to do a little due diligence on how to book it. The Controller wanted to amortize it over 3 years, but I insisted you do not amortize intangible assets, but that it is tested for impairment periodically (one of the few things I remembered from college accounting). Let's not forget to thank Andy Fastow and Bernie Ebbers for this one.

FAS 142 addresses Goodwill and Intangible Assets. Here is a summary excerpt from the FASB that directly answers how often Intangibles will be tested for impairment:

"In addition, this Statement provides specific guidance on testing intangible assets that will not be amortized for impairment and thus removes those intangible assets from the scope of other impairment guidance. Intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets with their recorded amounts."

So our Journal Entry would look like this:

Intangible Asset - Copyright$ XXXX
Accounts Payable (or Cash)$ XXXX

Now how do I test for impairment...

I will do the commentary tonight.

Couple more hours until the filing deadline nears. If you're like my dad, then you probably filed and extension with Form 4868. However, this DOES NOT mean you can pay late if you owe; you MUST make an estimated payment along with the Form 4868!

I was asked this question recently:

"I ran into an issue with accounting for goodwill that doesn't quite make sense to me, and I was wondering if someone would be able to explain it a bit further.

The topic at hand has to do with goodwill impairment when one company either wholly-owns or partially-owns a subsidiary. What I don't understand is, why does the goodwill belong to the subsidiary when the subsidiary is wholly-owned, but when only partially-owned the goodwill belongs to the parent company.

To me it seems like this should be the other way around? "

I would think the answer is that in a wholly owned subsidiary, any expense, impairment or not, would be rolled up into the consolidated financial statement.