No-one it seems, apart from the partners dealing with valuation and strategy at accountants PricewaterhouseCoopers (PwC). They have come up with a handy little model that shows what happens to earnings if goodwill is broken down to its intangibles – brand, customer relationships – and the residual goodwill is not amortised, as could happen, if the proposals are accepted, to all deals for comparative purposes, from now on.
Put simply, a deal with an EBITDA of 70 and goodwill of 20 that produced profits before tax of 20 under UK GAAP could end up losing 13 if goodwill is broken down differently under the proposed new rules. When CEOs realise what will this do for their stock options, deals may be put closer under the microscope. Brian Caplen
