OUCH! MS has to write off >$6bn in Q4 to post a Q4 loss

[M.U.G.E.N]

Millenium said:

M.U.G.E.N said:

Millenium said:
Suprised this took so long to post. :P

Anyways, I don't really understand this concept of writing off their value?

Guess we'll see a ~1B loss for the quarter then, not favourable, but not too bad all things considering.

Companies write off values based on the current value of assets (even liabilities etc) over time. Such a thing happens when a drastic change occurs to the overall value of an asset that lost it's value and can not be reasonably expected to change back to the estimated value in the foreseeable future. In such cases it's 'required' that they do a write off in US GAAP

Basically MS knows now this investment has gone to shit. It sucks but that's the nature of investments. You win some you lose some.

just woke up so if I just typed a bunch of gibberish hard to understand, I apologize :P

Cheers for explaining that (Accounting never was my strong point :p), makes sense now, I didn't even think of the fact that it was considered as a asset before you reminded :)

Yeha no prob. They are writing it off here instead of writing it down. It means the investment is being considered as impaired and not decrease in value. They are iirc taking the whole investment out of their books now with this.

The matter of kowen is trying to make above is that you can use such a thing as an itemized deduction in your income taxes later on. But the two problems with that theory is

1. This one was no way intentional. Write offs never reflect good on a company or it's management. This was something that was unavoidable

2. The way this could be a tax benefit is that, atleast a really significant one (keep in mind this is one of the biggest companies in the world, so their tax amounts should be pretty impressive as well) would be if this 6 billion amount of moves them down to a lower tax bracket (as in the more you earn the more % they tax you, so for example someone who earns 100k will get taxed 15% but someone who earns 99k only get taxed for 10%)

From a financial point of view, there are several ways we can look at a situation like this. Imho it's a very bad outcome with some positives in a tax deduction.

But this is the world of technology, stuff like this happens. Such is the nature of investments in tech in a rapidly changing industry