N APRIL 24, 2002, AOL Time Warner reported a $54 billion loss for the quarter ended March 31, 2002. The loss was the largest quarterly loss ever reported by a U.S. public company. The loss represented an impairment charge resulting from new accounting rules that force companies to recognize declines in value of goodwill that occur after a business combination is completed.
In June 2001, the Financial Accounting Standards Board (FASB) overhauled the rules of accounting for business combinations and goodwill and other intangible assets. Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations,” eliminates the pooling of interest method of accounting and requires the use of the purchase method of accounting for business combinations initiated after June 30, 2001. In addition, SFAS 141 established specific criteria for the recognition of intangible assets separately from goodwill.
