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Fri, Apr 11, 2003

'Goodwill' Writedown at Boeing

Boeing Plans $1.2Billion Quarterly Charge

"Goodwill" is what accountants call the deficit in value between what a company is worth on paper, and what it's worth, to somebody real. Typically (and simplistically), as companies buy other companies, they pay more than the company is "worth," because of some particular strength the acquisition brings to the acquiring company. Whatever "extra" the acquisition costs -- that's "goodwill."

Goodwill sits on corporate balance sheets, mostly unnoticed. It doesn't get depreciated; it generally doesn't rise, or fall, in "value," unless the company takes a specific action to change it. Well, Boeing's changing it, and they announced the decision late Thursday.

In the Q1 (first quarter) report to come out April 23, Reuters reports that Boeing will write down roughly $1,200,000,000 in "goodwill." By doing so, it plans to "...strengthen financial reserves at its Boeing Capital Corp. unit," according to the news service. You don't have to try to understand that statement -- here's what matters: in stockholder terms, each share just got deflated by about a buck and a quarter.

FMI: www.boeing.com

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