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The USPS is a bad comparison to make. The USPS pension fund is a public pension fund, whereas social security (OASDI) and Medicare are social insurance programs. There are good reasons why the accounting for these should be different. In fact, the issue that you point out with the USPS pension fund arose when they forced a public pension plan (the USPS) to check for actuarial balance similar to a social insurance program (the 75 year long-term actuarial balance), instead of the simple employer accounting basis under GASB 68 (which is similar to the FAS 87/88 standard for private firms)

I am not arguing that PAYG is the *worst* accounting for social insurance programs, and in fact I don't think that. There are many good reasons why PAYG with some sort of short term/long term checks of actuarial balance *can* be appropriate measures for the health of a social insurance plan. However, OP said OASDI and Medicare are in SURPLUS, full stop, and I think that greatly oversimplifies the issues involved.

Disclaimer: I am an actuary, but no longer in active practice.

It might be, if it can't be assigned to any other sort of intangible asset, but given that they aren't keeping the Transmeta name or anything like that and their main motive in buying the company is to use the technology in their own products, I would think it probably is intellectual property.

From the Statement of Financial Accounting Standards No. 141, The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed shall be recognized as an asset referred to as goodwill. An acquired intangible asset that does not meet the criteria in paragraph 39 shall be included in the amount recognized as goodwill..

Reading this myself, I see that I have made a mistake: the $400,000 figure is not necessarily goodwill either, as the article mentioned neither the other assets Novafora acquired (e.g. property, plant, equipment) nor the liabilities assumed.

I do not (and never have believed) that Jerry Yang and the rest of the Yahoo board was ever were serious about selling the company.

First there were no negotiations, Microsoft simply extended an offer which the Yahoo! board turned down.

For example, look at the actions the board and management took right after the offer was announced.

The board didn't want to be eaten so they took steps they thought would slow down an acquirer.

They enacted huge employee termination compensation plans, including golden parachutes for management.

That's standard practice in business, and has been for a long tyme [sic] businesswise [sic] .

They tried to make a deal to acquire a portion of AOL

Citation please.

Apple had been operating under the common interpretation of Statement of Financial Accounting Standards No. 123:

http://www.fasb.org/pdf/fas123.pdf Oct 1995, 134 pages

However, Apple and several thousand other companies were surprised to learn that their understanding of FASB 123 might be flawed, and so the Federal Accounting Standards Board issued a clarification in December 2004, the cleverly named Statement of Financial Accounting Standards No. 123 (revised 2004), more commonly known as FASB 123R.

http://www.fasb.org/pdf/fas123r.pdf Dec 2004, 286 pages

Now, it will be intuitively obvious to even the most casual observer that there are certain technical differences between these documents, extending beyond mere thickness and into the mystical realm of public accountancy. I won't belabor the obvious by going into details of the audits and revisions that resulted from this event.

Apple had been operating under the common interpretation of Statement of Financial Accounting Standards No. 123:

http://www.fasb.org/pdf/fas123.pdf Oct 1995, 134 pages

However, Apple and several thousand other companies were surprised to learn that their understanding of FASB 123 might be flawed, and so the Federal Accounting Standards Board issued a clarification in December 2004, the cleverly named Statement of Financial Accounting Standards No. 123 (revised 2004), more commonly known as FASB 123R.

http://www.fasb.org/pdf/fas123r.pdf Dec 2004, 286 pages

Now, it will be intuitively obvious to even the most casual observer that there are certain technical differences between these documents, extending beyond mere thickness and into the mystical realm of public accountancy. I won't belabor the obvious by going into details of the audits and revisions that resulted from this event.

1. the lease term is greater than 75% of the property's estimated economic life
2. the lease contains an option to purchase the property for less than fair market value
3. ownership of the property is transferred to the lessee at the end of the lease term
4. the present value of the lease payments exceeds 90% of the fair market value of the property

1. the lease term is greater than 75% of the property's estimated economic life
2. the lease contains an option to purchase the property for less than fair market value
3. ownership of the property is transferred to the lessee at the end of the lease term
4. the present value of the lease payments exceeds 90% of the fair market value of the property

I'll second the doubt about Microsoft ever doing this, and add more reasons. R&D costs are always expensed in the current period; to do otherwise is not according to GAAP. Furthermore, R&D is given a substantial tax credit -- not a deduction, a credit. I believe it's $1 for $1, so if you classify an expense as R&D, it comes right off your tax bill. At my company, every year I have to fill out a form asking how much of my department's activity goes toward R&D (costs such as customer support doesn't count, for example).

This change would have occurred 10 years ago if Congress hadn't interfered on behalf of companies trying to hide their largesse from shareholders. The rest of the world is in the process of implementing a similar accounting treatment of options. The US would have looked idiotic to have delayed this further.

This change would have occurred 10 years ago if Congress hadn't interfered on behalf of companies trying to hide their largesse from shareholders. The rest of the world is in the process of implementing a similar accounting treatment of options. The US would have looked idiotic to have delayed this further.

Seems no one has even touched on how this will make the CPA/CPA firm more 'valuable' to the company with options on the books. There are different types of options. ISOs (Incentive Stock Options) are usually granted for a short period of time, are restrictive in nature AND are counted in the employee's income at the time of exercise (the difference between the grant price and the market price at exercise is income). ISOs are not market tradable. I can't sell you my ISOs, I can only exercise them or let them expire. They do reduce the per share value of the outstanding shares, but only if and when they are exercised.
Black-Scholes might be able to give an individual an idea of what their options are worth but only if those options can be sold directly. BS (generally) requires a time caculation based upon the expiration date of the option. Options that a) never expire b) didn't cost the owner (ie nothing but time at the company or a promise) cannot have the same value as one purchased in the market. Options purchased in the market don't affect the company and aren't expected to be listed as an expense for a different reason. If I sell a call option on MSFT or RHAT I'm betting that a) the price won't go as high as the strike price b) even if the price does go as the strike price and the call is exercised that I will have made more money by selling the call as well. This option has nothing at all to do with the company (I receive the call price and the stock price), doesn't reduce or dilute outstanding shares or earnings and can be valued.
Requiring companies to list unexercised options as expenses when there is no way to properly value them ie there is no active market for the employee options and neither the employee nor the company have any expense (other than the fee paid to the CFO/CPA, etc of keeping the option on the books) is as ludicrous as the recent decision that requires companies to write up and down the value of acquisitions on at least an annual basis instead of maintaining Goodwill on the books as a static but declining figure. http://www.fasb.org/st/summary/stsum142.shtml Looking at the 'worth' of a company the goodwill listed should neccessarily be subtracted when determining a hard asset value of the company. Unpaid - and I would argue *unearned* - compensation should similarly not be subtracted from the company's books. The 'value' of options should not be listed as an expense unless and until the company is required to pay out the value of the expense. To do otherwise only puts money in the CPAs' pockets and does nothing to properly value the business nor account for income and cash flow. The converse is also true: If a company is *required* to list as an expense unexercised options as an expense, then expired options would have to be counted as income. Neither makes sense, clouds the true earnings issue and only makes money for the people charged with tracking such information- coincidently the *same* people who are recommending that this be listed as an expense in the first place.
The recent collapse of publicly traded companies who relied on the same firms that provided audit services for their consultation services ('In auditing your books, Mr. CEO and Board of Directors, we find that you are in need of tax planning, offshore income rerouting and income tax evasion- ahem reduction strategy- services. Luckily for you, a division of our Big 5 Accounting firm offers such services. By utilizing our other division we can increase your market capitalization, reduce your expenses and defer or eliminate all your income taxes so that the share price will rise. Just sign here and we'll start work tomorrow.') should at least give a reason to pause and consider the overall impact of having the members run the rule making body. There are three branches of government to prevent any one from gaining too much power, This is in some sense, the fox guarding the hen house and gives FASB and its members the ability to make rules that in the long r

It's amended not to include ESPP at this point in time, but will be considered/reconsidered in the near future, as mentioned in Appendix A.

Give them an inch, might as well give them a mile.

Still trying to find the right FASB document that goes into further details.

The charge is for "the impairment of goodwill and intangibles." This is a specific accounting situation covering the decline in value of an intangible asset such as a corporate brand, see the Financial Accounting Standards Board statement 142 or the March 2002 CPA Journal.

"RH says they're now following the Generally Accepted Accounting Principles, developed in the wake of recent accounting troubles at some companies."

When I last checked GAAP-based accounting has been around since the 1930s although they were not known by that name. In the USA, FASB is reponsible for establishing US GAAP. If Red Hat previously chose not to follow these standards and cook their books instead, we should hardly applaud them for finally doing what they should have done all along... especially now that deceptive accounting practices are no longer in fashion in the corporate world.

From the American Institute of Certified Public Accountants:
Between 1938 and 1959, the AICPA's Committee on Accounting Procedure (CAP) issued fifty-one authoritative pronouncements known as Accounting Research Bulletins that formed the basis of what became known as generally accepted accounting principles, or GAAP. In 1959, the CAP was replaced by another part-time body, the Accounting Principles Board (APB), which during the next fourteen years issued thirty-one new standards.

From the Financial Accounting Standards Board:
Since 1973, the Financial Accounting Standards Board (FASB) has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports.

This started long before George 'W' and represents a larger than Enron class failure of auditing and business ethics. The point of accounting is to report the accurate state of affairs of the organization, not some CEO/CFO's wishful thinking.

Generally Accepted Accounting Principles (GAAP) are created and maintained by the Financial Accounting Standards Board (which interestingly doesn't come up with a Google search -- at least when I looked for it). Much of the current round of problems can be laid clearly in their lap.

The consensus in the auditing community is that the lesson was not learned with Enron and hence an even larger disaster will have to happen before this increasingly corrupt set of practices, auditors, and corporations is revised.

I'll also note that I am about as pro-business as it is possible to be, but when all of business stands on quicksand because of bogus financials there is the opportunity for just a little shaking causing the whole thing to liquify and slide into the morass.

-- Multics