| Subject: | Re: [socialcredit] Re: "Goodwill" ~ question for Bill Ryan | | Date: | Monday, November 12, 2007 12:15:16 (-0500) | | From: | Joe Thomson <thomsonhiyu @....ca>
|
| In reply to: | Message 5103 (written by william_b_ryan) |
Thanks, Bill. I take it that Canadian accounting practice would now
probably parallel American, since there is considerable integration of our
two economies.
When you say 'inherent' goodwill would not be shown as an 'Asset' on a
corporate balance sheet, then a possibly appreciating 'intangible' value,
like, say, "brand name recognition", ("Pepsi-Cola", for instance), would not
be shown as having any 'value' whatsoever ?
Any 'value' in that could only be materialized as an 'Asset' in the books
of some other company that had paid an excess over the 'book value' for
say, taking over the "Pepsi-Cola Company"?
If this is so, then there would be some difference between the way a
'balance sheet' is set up 'corporately', and the way a 'National Balance
Sheet' would be set up, would there not?
Joe
----- Original Message -----
From: <william_b_ryan@yahoo.com>
To: <socialcredit@elistas.com>
Sent: Monday, November 12, 2007 11:35 AM
Subject: [socialcredit] Re: "Goodwill" ~ question for Bill Ryan
> 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
>
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