[Foundation-l] thoughts on leakages

[Anthony]

On Jan 10, 2008 1:19 PM, Gregory Maxwell <gmaxwell at gmail.com> wrote:
> On Jan 10, 2008 1:08 PM, Gerard Meijssen <gerard.meijssen at gmail.com> wrote:
> > Hoi,
> > There is one thing that the Wikimedia Foundation has lots off. Goodwill.
> > Many organisations value goodwill highly and have it as an item on their
> > balance sheet..
>
> ... mostly because they've acquired other companies at substantial
> multiples of their valuations
> [http://en.wikipedia.org/wiki/Goodwill_(accounting)#Modern_meaning],
> not due to fruits of initiatives like "don't be evil".
>
Exactly.  [[Book value]] often has very little to do with [[market
value]].  Confusing the two is a very common misconception, especially
when dealing with [[intangible asset]]s.  Intangibles (like Goodwill,
but also like trademarks) are valued on a balance sheet at the cost to
purchase or develop them.  If you buy a trademark, it would go on the
balance sheet at the price you paid for it.  If 10 years down the road
the trademark is now worth 100 times as much as when you bought it,
it's still listed on the balance sheet at the price you bought it for.
 (Unless you're Enron, anyway.  Their use of [[mark to market]]
accounting to eschew these principals is a big part of what got them
in trouble.)

That said, http://en.wikipedia.org/wiki/Goodwill_(accounting)#Modern_meaning
is incorrect.  It says "Goodwill cannot be negative", but this is
incorrect.  Goodwill *can* be negative.  See
http://www.investopedia.com/terms/n/negativegoodwill.asp.  It's
relatively rare, but it happens.