- There is a difference between accounting and economic goodwill.
- Facebook’s $18 billion goodwill acquisition of WhatsApp looks a lot like AOL Time Warner’s goodwill of $128 billion.
- Economic goodwill not on balance sheets is what to look for. Unfortunately, you won’t see it anywhere.
Accounting is an essential part of analyzing a company as different accounting regulations and principles bring about totally different analysis results.
In today’s article, I’m going to give you a small piece of insight on how I do research, how it differs from the usual screening processes that most use, and why it is important. I won’t elaborate on all the possible inconsistencies instance-by-instance as that analysis is better left to books on accounting. Instead, we will discuss one small line item on the balance sheet, goodwill, and how it can severely skew one’s perception of a company. More →