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

[Kasz216]

M.U.G.E.N said:

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 :)

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%)

You have never paid taxes in your life have you?  That is not how taxes work in the slightest.

Taxes work on a graduated system.

If someone who earns 99 K will get taxed at 10%

Someone who makes 100K  will get taxed 10% on their 99K,  and 15% on there exrta 1K.

In otherwords, the person who makes 100K will still have more money post taxes.

"Dodging tax brackets" is a myth made by people who know nothing about taxes.

This 6 billon dollar "loss" means that they won't have to pay taxes on 6 billion dollars worth of profits this year.  Considering this was money spent two-three years ago.  It's really not a bad deal.

 

Also... coproations have a flat tax.  There are no "Corporation tax brackets" even if that was how tax brackets did work! (it isn't.)   It's all 35 percent of taxable income greater then $335,000 unless your a special "small buisness" corporation that puts you on the Individual tax bracket.

So in otherwords, Microsoft will save around,   $2,100,000,000 in taxes due to this writeoff.