Microsoft’s First Quarterly Loss Facts
A lot of media have been leading with the headline that Microsoft reported its first ever quarterly loss. This is completely true, and yet, Microsoft didn’t actually lose any money during the quarter. So, what really happened. If the world of accounting had been better known to Mark Twain, he might have altered his famous quote to suggest that there are, “Lies, damn lies, and accounting.” Accounting is one of those things that seems like it should be straightforward enough. The popular notion is that companies and their lawyers and accountants deliberately obfuscate the truth about their company’s finances. That isn’t entirely untrue, but it is also true that accounting for a large corporation is not simple. Writing Down Goodwill One of the most subjective, and yet, completely legit, parts of corporate accounting is something known as goodwill. Essentially, the idea is that when you purchase a company, you are buying not just the tangible assets and liabilities of the company, but also the “good will” that exists toward that company. The acquiring company gets to count this so-called goodwill as an asset on its balance sheet. Although goodwill is a completely recognized, after all, a company is worth more …