Today if a company is compared with Hewlett-Packard Company that means its potentiality is going down. What comes to mind is the soiled picture of its credit default rating, unethical implementation of business practices and huge loss in accusation of Autonomy.
Consider Xerox Corporation, which had a stock of $16 billion when the company acquired forty-one other companies by spending $9.1 billion. The company lost a lot, rather than gaining by this acquisition.
To streamline the books of accounts a huge write-down is needed, which is called goodwill. It is an asset of intangible in nature and has no value in real market if sold. It only shows the name and fame of the company in the market. Xerox Corporation shows its goodwill at $9 billion in its balance sheet which shows the company is worthy.
Goodwill is an intangible asset and no one can value it. It is only on paper and nothing to do with business. According to some accountants it is termed as the difference between the real cost of acquisition and the price of its book value of accounts.
Hewlett-Packard Company experienced an $8.8 billion decrease of goodwill value caused by the autonomy acquisition which includes $5 billion caused by the fraudulent activity of later by using non standard accounting implementation due to which Hewlett-Packard Company suffered a decline of 12% in its share value in one day.
Out of $11 billion of the purchase price set for Autonomy by Hewlett-Packard Company $6.9 billion was allocated to goodwill. Three months earlier $9.2 billion was written down by Hewlett-Packard Company which was due to its 2008 buyout of another company Electronic Data Systems Corp.
Credit Agricola has projected goodwill of 16.9 billion EUROS for its stock of 14.6 billion EUROS.
Goodwill write down should be done by these big companies in order to maintain a proper and justified balance sheet as the goodwill is representing an incorrect picture of their credit standing.