| Subject: | [socialcredit] Re: "Goodwill" ~ question for Bill Ryan | | Date: | Monday, November 12, 2007 08:35:27 (-0800) | | From: | william_b_ryan <william_b_ryan @.....com>
|
Bill, in Douglas's "The Fallacy of a Balanced Budget",
which I'm sure you've seen, he talks about some of the
'intangibles' Government pays for that would be
comparable to what might be represented as "goodwill"
on a Company's "Balance Sheet". Does modern
accounting still use this "goodwill" designation?
Joe
------------------------------------------------
-------------------------------------------------
I've appended below the text from "The Fallacy of a
Balanced Budget" from a PDF document that Wally Klinck
circulated a few years ago that also includes a letter
from Douglas to Aberhart.
Yes, modern accounting does use the "goodwill"
designation. There are two types of goodwill:
inherent and purchased. Only purchased goodwill is
shown on balance sheets.
The rules used to require that purchased goodwill be
amortized in equal charges over a period not to exceed
forty years. In 2001 the rules were changed to
eliminate amortization and require charges for
impairment to goodwill, if any, during the accounting
period:
-
Case Study
The Financial Accounting Standards Board (FASB), the
body charged with establishing generally accepted
accounting standards, in 2001 changed the method by
which companies account for goodwill. Goodwill is
posted as an asset to a firm's balance sheet when the
firm makes an acquisition for above net asset value.
In other words, goodwill is created when a firm pays
more than the accounting value of a firm's assets
adjusted for its debts.
Huge amounts of goodwill were created in the late
1990s and early 2000s when the merger and acquisition
business was progressing at full steam. Prior to 2002
companies were required to write down, or deduct, a
prescribed amount of goodwill each accounting period.
Thus, firms that engaged in major acquisitions at high
prices posted large amounts of goodwill that had to be
written off over a period of years. Goodwill writeoffs
increase expenses and reduce reported earnings to
shareholders.
Prior to the change in accounting standards, companies
were required to amortize goodwill regardless of how
much the acquired assets were actually worth. Under
the new standard imposed by the FASB in 2001 goodwill
does not have to be reduced in value until it is
determined the acquisition that created goodwill is no
longer worth the purchase price.
This change was expected to result in substantially
higher reported earnings for companies with large
amounts of goodwill on their balance sheets. For
example, AOL Time Warner had $127 billion in goodwill
on its balance sheet at the time of the change and was
expecting to report substantially higher earnings
because of the change in standards. On the downside,
the firm announced in March 2001 it would incur record
charges of $54 billion in goodwill impairment in the
first quarter.
http://dictionary.reference.com/browse/goodwill
-
The New English Weekly, July 28, 1932, pp. 346-7.
The Fallacy of a Balanced Budget
By Major C. H. Douglas
A common cause of confusion to those unfamiliar with
the technique of finance can be found in the excusable
assumption that a statement which is true and obvious
in regard to individual experience of money matters is
equally true in regard to the money matters of a
nation.
There are at least two assumptions made by those who
argue in this way. The first is that the process by
which a community obtains money is fundamentally
similar to the process by which an individual obtains
money. The second is the idea, alternatively, that
money is limited in quantity by the laws of nature, or
that it is always exactly equal in amount to the price
values of the goods which it is supposed to represent.
Now, as a matter of fact, no one of these common
assumptions is justified, as can easily be seen by
anyone who will take the trouble to give the matter a
little thought. All individuals obtain money by
getting it from somebody else, i.e., so far as
individuals are concerned, money is quite correctly
defined as a medium of exchange (although not an
invariable medium of exchange). But in the case of a
sovereign community, this never is and never has been
the case. Whether the power be delegated, as in the
case of Great Britain to the Bank of England, or not,
a sovereign community has the power of actually
creating money--it is self-financing, a situation
which in fact places the community and the individual
in a position of technical opposition, the community
and the individual always being on opposite sides of
the ledger.
The first alternative of the second assumption is
quite obviously not true if it be granted that a
sovereign community has the power of creating money,
and the second alternative assumption can, I think, be
disproved with very little additional difficulty.
Before attempting this disproof, however, it may be
desirable to point out that the statement that the
first essential of sound finance is that a country’s
budget must be balanced, that is to say, that all the
expenditures made by government departments must be
recovered from the public *in the same period of
time,* i.e., at the same rate, that they are
disbursed, depends absolutely for its soundness on the
failure to disprove this contention.
A balanced national budget means, and can mean nothing
else, than that all national expenditure is financed
with what we may call “old money.” A portion of this
expenditure is distributed in government wages and
salaries, much of which goes to the production of what
we may call “intangibles,” such as defence,
organisation, education, and so forth, and a further
portion in payment of the interest on outstanding
loans. In regard to that portion which goes to the
production of public works, the position would hardly
seem to require argument.
Now in regard to the first portion of this, if the
whole of it is recovered at the same rate at which it
is distributed, it must be quite obvious that the
assumption is made that there is an absolute
equilibrium between production and consumption, and
such an assumption is never justified. Leaving out of
account the physical assets, many of them having many
years of life, which are produced by a portion of
government expenditure, it is undeniable that there is
a constant increase in the real value of intangibles,
such as better organization, better education,
increased scope of intercommunication, utilisation of
the possibilities of modern science, and many other
bases of real credit, which means that every year’s
working carries forward into the succeeding year a
considerable body of real values which would be quite
correctly represented in a business by an increase of
good will. In regard to the portion of the national
budget commonly called the “consolidated fund,” and
the service of various loans, any examination of the
destination of the greater part of this must make it
obvious that it is re-invested and not spent upon the
purchase of consumable goods. Any portion of it paid
by industry, as such, must appear in the prices of
consumable goods, since the producer-taxpayer must
charge his taxation into the cost of his product if he
is to remain in business. The portion of the taxation
paid directly by the consumer means a correspondingly
less body of effective demand against the goods for
sale, or it means an increasing body of sales below
cost, resulting inevitably in the bankruptcy of the
producer. That all these causes operate to produce a
lack of effective demand is obvious to anyone who will
observe the “To Let” and “For Sale” notices which are
our chief national exhibit. To put the matter another
way, a balanced national budget and a balanced budget
of all the country is an arithmetical impossibility,
even if every business disposed of its product at
cost, but as the current theory of business is that it
should be carried on at a profit, the proposition can
only be made to function by each balanced business
budget being paralleled by a corresponding loss in
some other business. This loss is approximately the
difference between price values produced and
purchasing-power available to meet these values. This
purchasing power includes not merely that relating to
goods for sale but also payment for exports and other
monies not distributed in respect of goods for sale in
the home market; and these payments go some way to
reduce the apparent loss.
The position disclosed by this examination is, in
fact, similar to that disclosed by an examination of
the price values which are produced in a manufacturing
business in comparison with the amount of money
available at any moment as a demand against these
price values. There is always a body of price values
against which there is no existing effective demand,
but upon which those institutions which are in a
position actually to create money [those comprising
the banking system] are generally willing to do so
*upon terms sufficiently satisfactory to themselves*
[emphasis added]. As, however, this money is always
loaned, and a price is charged for the loan, it is
clear that the unbalancing process is cumulative. In
periods of excessive capital production, financed by
large creations of new money, this situation is not so
noticeable, and is precisely similar to that produced
by a budget balanced by loans instead of taxation.
The issue involved in this question of the balanced
budget is precisely the same as that involved in the
maintenance of the present price system, and can be
clearly enough stated. It is that all improvements of
process, together with the potential benefits of
machine production, shall go to form a reserve of
security against loans created by the financial
system, and the public at large shall pay an
increasing tribute to the financial system for their
use. It is not a highly ethical situation, even if it
could be made to work, but it cannot be made to work
for reasons for which I have dealt with at some length
elsewhere [*The Monopoly of Credit,* etc.]. This is,
perhaps, unfortunate, since it seems unlikely that our
financial rulers can be made to appreciate that they
are themselves the greatest, if not the only danger to
the social system they control. Being, as apparently
they are, determined upon suicide, we shall probably
have to endure a reorganisation of a productive system
which is quite satisfactory, in order to demonstrate
that it is not the same thing as an immoral
distribution system which its controllers do not even
understand.
-
The above position was concisely summarized by Major
Clifford Hugh Douglas in the following brief excerpt
from a letter of advice (see *The Alberta Experiment*)
written from London to the Premier of Alberta and the
Executive Council on the 24th of February, 1936:
THE HONOURABLE WILLIAM ABERHART, M.L.A., B.A.
Premier of Alberta, Edmonton, Alberta, Canada.
Strictly Confidential to Executive Council of Alberta
DEAR MR. ABERHART,
This seems to be a suitable occasion on which to
emphasise the proposition that a Balanced Budget is
quite inconsistent with the use of Social Credit
[i.e., Real Credit--the ability to deliver goods and
services “as, when and where required”] in the modern
world, and is simply a statement in accounting figures
that the progress of the country is stationary, i.e.,
that it consumes exactly what it produces, including
capital assets. The result of the acceptance of this
proposition is that all capital appreciation becomes
quite automatically the property of those who create
an issue of money [i.e., the banking system] and the
necessary unbalancing of the Budget is covered by
Debts.
C. H. Douglas
London, England
__________________________________________________
Do You Yahoo!?
Tired of spam? Yahoo! Mail has the best spam protection around
http://mail.yahoo.com
|
Re: "Goodwill" ~ q
Reply to this message