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The Financial Accounting Standards Board on Wednesday formally released to the public its new rules for writing off merger premiums, giving opponents and supporters a month to review and comment on the proposal. FASB, the Norwalk, Conn.-based group that writes the nation’s accounting standards, issued a proposal in December that would end the amortization of goodwill, which is the purchase premium recognized in most mergers. But that decision must be opened to public comment, and after that the FASB’s five board members must formally ratify it. That is expected to happen by the end of June. The new rules would end annual goodwill charges and instead ask companies to write off goodwill only when they can show it has declined in value, a condition accountants call “impairment.” Under current rules, companies must amortize goodwill every year, as with other assets. Goodwill amortization charges reduce companies’ reported earnings and are thought to reduce stock prices. The new approach is dramatically different from one taken in a proposal released in September 1999. At that time, the FASB said it would slash the allowable time for companies to amortize goodwill to 20 years from 40 years. Technology companies, financial institutions and some members of Congress decried that decision. But the new proposal will not alter the FASB’s plans to eliminate pooling-of-interest accounting, a merger accounting technique. Pooling is popular because it lets companies avoid recognizing any goodwill. If adopted, the rules issued Wednesday would make moot that advantage because they give companies such wide latitude to decide how to write off goodwill. The proposal will be open to public comment until March 16. Copies can be obtained on the FASB’s Web site, www.fasb.org. Copyright (c)2001 TDD, LLC. All rights reserved.

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