Don't Worry About AT&T's $25 Billion Write-Off
When a company acquires another company, any amount paid that's above and beyond the net asset value of the acquired company gets stuck on the acquiree's balance sheet as intangible assets. One class of intangible assets is goodwill, which isn't amortized and never expires. However, companies are required to assess the value of goodwill each year and mark it down if something has materially changed.
This is the predicament that AT&T (NYSE: T) found itself in during the fourth quarter. The company has a long history of complicated mergers and acquisitions. AT&T traces its roots all the way back to Alexander Graham Bell and the invention of the telephone. The current iteration of AT&T, formed when SBC Communications merged with AT&T Corp. in 2005, is now a leader in both wireless and wireline communications.
This history has produced a staggering amount of goodwill sitting on AT&T's balance sheet. At the end of 2021, AT&T had $92.7 billion of goodwill, excluding goodwill that was shed from the spin-off of WarnerMedia last year. About half of the company's shareholder equity was tied up in goodwill at the time.
Source Fool.com
