

Google agrees to purchase web advertising company in cash







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RE: Missing details...
By gus6464 on 4/14/2007 2:51:17 PM , Rating: 2
That is not really the way it works. There are so many accounting tricks out there that a company can buy another and write off almost the entire cost. Here are some examples:

A company can write-off fines paid on antitrust lawsuits.

Also lets say google decides to sell off doubleclick in a couple of years because it is not profitable, and they sell to another company for 1 billion lets say. The amount that they technically lost which in that case would be 2.1 billionn they can just write off.

And the last one is for the people that think that Sony and MS were really losing money for every console sold, there are two ways to report earning, accounting method of reported earnings and economic method of reported earnings. Most companies nowadays use economic method because it takes into consideration the normal rate of return of the industry, so for example if a company says they made 0 net profit and they use economic method they have already taken into account the normal rate of profits that their specific industry has which is usually around 8%. Normal rate of return is not considered growth but it is still a profit. Also companies can write off most of the money used to develop a product. Of course only huge corporations can do this. If you want to know more you should read up on tax law as there are so many other things that corporations can do in order to minimize loses. And it is all done when it is time to pay taxes.

RE: Missing details...
By masher2 (blog) on 4/14/2007 4:11:29 PM , Rating: 3
> "The amount that they technically lost...would be 2.1 billionn they can just write off..."

It doesn't work quite like that. The notion that companies can make money by losing it is fallacious.

If Google writes off a $2.1B charge, they don't pay taxes it on. That would save Google $735M in taxes...but they still lost $1.365B. That assumes they even make that much in profit in the stated year...otherwise, they'll pay even more.

A personal analogy might clear things up. Say you're paying 25% income tax. At work, you break a $100 item, so your boss takes it out of your pay. At the end of the year, you pay taxes on $100 less income, so that fine really only cost you $75. But it still cost you.

> "Also companies can write off most of the money used to develop a product...Of course only huge corporations can do this."

Err, no. Any entity, even a Chapter S or a private individual, can write off costs of doing business....which includes any money spent developing a product.

> "A company can write-off fines paid on antitrust lawsuits."

Of course. You think this shouldn't be the case?

RE: Missing details...
By theapparition on 4/16/2007 8:19:49 AM , Rating: 2
Kramer: "Jerry, all these big companies write things off"
Seinfeld: "You don't even know what a write off is, Do you?"
Kramer: "No, but they do...and they're the ones writing it off"

Funniest exchange ever.

RE: Missing details...
By glennpratt on 4/15/2007 8:42:05 PM , Rating: 2
Gus, this boils down to you not understanding the phrase "write off". Try running your own business for a year and doing your taxes. Write off isn't nearly as fun as it sounds.


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