Accounting Changes to Boost Profit for Some

Many companies will see their bottom lines improve next year thanks to new accounting rules.

Starting Jan. 1, rules issued by the Financial Accounting Standards Board will eliminate the need for companies to quarterly amortize, or charge off, balance-sheet “goodwill” created in mergers.

Instead, companies will have to write off such goodwill only when the difference between acquired assets’ fair market values, and the value of those assets as carried on companies’ books, is significant.

The amended rule is part of a broader order to standardize accounting procedures for mergers.

The upshot of the goodwill write-off change is that many companies will report higher earnings in 2002 because goodwill expenses will no longer be incurred each quarter.

Indeed, Bank of America Corp., the third-largest U.S. bank, said Tuesday that it expects net income to increase by $600 million next year because of the accounting change.

Also Tuesday, Qwest Communications International said it expects the change to boost earnings as much as $950 million in 2002.

Analysts say many other companies will benefit as well, though they point out that goodwill amortization is a non-cash charge--so the earnings benefit is arguably artificial.

Still, in an environment when earnings overall are depressed, the boost to net income will be welcomed by many firms.

Other companies that have recently said they expect to see 2002 earnings rise because of the accounting change include Wells Fargo & Co., Tyson Foods and McDonald’s.