Still being negative, and with big deal plays like Comcast/Disney and Cingular/AT&TW dominating the headlines, few investment bankers or analysts may have noticed or even care about a tiny accounting detail that could undermine their work. While IAS32 (International Accounting Standard), IAS39 and the vexed question of marking derivative positions to market are firmly on the radar, who is worrying about changes to IAS 36 (impairment of assets) and ZAS38 (intangible assets), and the proposals on business combinations, Exposure Draft 3, due to be formalised at the end of this quarter.

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

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter