AOL: We are going to flush billions down the drain
Reuters | at | by Mike
AOL Time Warner is expected to write off several billion dollars -- on top of the record $54 billion charge it took last year -- increasing the strain on its balance sheet, analysts and investors say. The world's largest media company said in October it was probable it would take a "substantial" noncash goodwill impairment charge in the fourth quarter to reflect the reduced value of its America Online unit since its 2001 merger with Time Warner.
Large charges "could very well have material impact on debt covenants because it erodes net worth and net worth has some meaning in the world of debt covenants," said Robert Willens, an accounting specialist at Lehman Bros. "It reduces shareholder equity."