Rawnoc educates naysayer skeptics on "goodwill" & balance sheets

Balance sheet has ZERO to do with market value.

It doesn't matter if the intrinsic worth of the three acquisitions is $5.00 or $5 billion. It's not the balance sheet's job nor Withum's job to decide if JB "grossly overpaid" or "got the deal of the century" on those acquisitions.

They could write the goodwill account to ZERO for all I care. Analysts and savvy investors automatically discount that as an "asset" and focus on "tangible assets" in the first place, never caring if Goodwill is zero or $5 billion. It's a completely useless figure on the balance sheet.

So I hope they write down the non-cash junk big and large. I wish all companies would do that so it doesn't interfere going forward making earnings reports confusing with future non-cash one-time charges and makes my life easier not having to calculate tangible book value if the whole thing is already tangible.

No problem. Here's how acquisitions work, the simple version:

If you pay $100 for something that has $10 worth of assets (say $10 in cash and nothing esle for simplicity), then the $90 you paid above the book value of assets as to be place on the balance sheet as something so decades ago accountants invented the term "Goodwill" which is non-tangible useless asset they put on the balance sheet to represent, in theory, the value paid for in the acquisition from patents, employees, rights to a product, etc. So in this example $10 cash, $90 Goodwill would be entered onto the balance sheet.

Now can you use that $90 in Goodwill to buy something? Not a damn thing. Eventually it gets written off down the road frequently anyway so it's completely useless on the balance sheet and even more useless in reality. NOBODY on Wall Street pays one iota to it. If the biggest companies in the world could "sell" their Goodwill they would sell it for nothing. :)

Goodwill is just as useless for a Dow 30 stock as it is for your independent plumber.

JBII being a penny stock is entirely irrelevant -- goodwill is completely useless. It's an intangible asset that only exists on paper which is why analysts and fund managers completely ignore it.

Now if you want to argue theory if JBII has off balance sheet assets that have value then the answer is of course they do. Their PAK-IT patents alone, for example, do. But I don't care. Value is proven through earnings and I think all companies should axe goodwill off their balance sheets since nobody even pays attention to it anyway except that I guess it helps people who are analyzing the historical balance sheets understand why tangible assets such as cash may have disappeared one day, then they'll know when they see goodwill it was because an acquisition was made, hence the absolutely useless asset.

Since GAAP accounting treatment for acquisitions changes more often than most people`s underwear, it`s foolhardy to call it simple arithmatic when it`s not. There were all sorts of new rules and changes in 2009 including the value of the stock in the acquisition being based on closing instead of announcement, directly affecting goodwill. Goodwill never plays into valuation. You show me two identical companies in every which way except one has a higher goodwill asset, and I`ll show you two identically valued companies.

"Value is proved through earnings" is a unique penny mantra? ROFL!!! Try Ben Graham, Peter Lynch, Warren Buffett, and 99% of Wall Street. Anybody who buys into a company for its "goodwill" asset is an idiot. I've never heard anybody anywhere do such a stupid thing.

I could just see it now.... "ABC analyst upgrades JBII to strong buy. Cites the high goodwill asset". LOLOLOLOLOL

Analysts will never mention goodwill as a plus. EVER! It can't be sold. It has zero value except for possible tax benefits.

But you`re right, I must be an insider because I'm more familiar with goodwill than you are. It`s the only logical explanation.
Raw