This morning, I was reading through my newspaper, something I still do because I'm old school. It's tactile and satisfying, and I'll encounter things that I wouldn't seek if I was just chasing after the things that interest me.
The article that struck me was a meta-article, as the Washington Post reported on the Washington Post's income over the last year. It wasn't pretty, as the balance sheets reflected a loss of over $45 million.
What was odd, though, was the the source of the loss. It was a $100 million accounting write-off, reflecting the financial impact of what was being called "impairment of goodwill." Otherwise? Things weren't so terrible. To which I said, huh? "Impairment of Goodwill?" I'd never heard that phrase, but I know what those words mean. That couldn't possibly mean what it appears to mean. You're monetizing how much people like you?
I looked it up. From investopedia, the definition is given thusly:
Goodwill is seen as an intangible asset on the balance sheet because it is not a physical asset like buildings or equipment. Goodwill typically reflects the value of intangible assets such as a strong brand name, good customer relations, good employee relations and any patents or proprietary technology.So if you screw up, or your brand name takes a hit, you can announce to the world that you've taken a huge loss for the year, even if you've actually and materially turned a profit. That helps reduce your tax liability, limit how much you might pay out in dividends, and all other sorts of other fun things.
Imagine for a moment if we mortals were allowed to do this. The belovedspear brand, for instance, is relatively weak. Should I be able to claim a significant loss, and reduce my tax burden? If I succumb to a norovirus right smack in the middle of a worship service, and my reputation is damaged, shouldn't that be reflected somewhere on my 1040 this year?
No such luck.
I guess reality is different if you're a corporation. I will say, though, that learning this did impair my goodwill towards corporate America and generally accepted accounting practices. I'm sure they'll find some way to monetize that.