19 June 2018 FT — Articles to Read

19 June 2018

List-Serve Comment (related to 18 June 2018 Question): Add: vision exams 1/year + teeth cleaning is recommended every 6 months, but most of us benefit from every 3 months even though insurance does not pay for the extras.  To reduce the cost, you need teeth cleaning only, not dentist’s exam, in the extra months.  Low level infections around the gums reduce stress on your heart.


Question: According to MSN:Lifestyle, what are 13 things I wish someone had told me before I had a second baby?

Accounting – Pg. 7

–          Goodwill is defined as the amount one company pays for another over and above the appraised value of the target’s assets, less any assumed liabilities

–          …it represents “the conjectural future profits that an acquiring manager hopes to realize through an acquisition”

–          Thanks to the long M&A boom and recent accounting changes, this “hope” value have become significant part of corporate balance sheets

–          In the UK, companies used to amortize goodwill – meaning they took an annual charge against their profits, with a view of writing off the whole amount over a fixed period – generally about 20 years.  But since 2005, they have been able to treat it as a permanent asset, only writing it down if it is deemed “impaired” by the company and its auditors.  This is established by an annual impairment test

–          First, there is the question of whether goodwill has much status as an asset.  It cannot be sold and, in the event of bankruptcy, almost certainly has no value

–          …it allows companies to overstate the success of deals because it does not factor in the amount laid out to achieve the additional sales and profits.  That encourages managers to push through marginal or even wasteful combinations

–          Bosses then produce business plans and cash flow forecasts for these units, from which they compute net present values, and thus test whether the underlying assets are worth more than the goodwill written up against them

–          Not only does this process minimize the change of an impairment, it depends heavily on the willingness of auditors to challenge the numbers plucked out by management

–          “of course, goodwill matters because it’s a measure of capital allocation”

–          Under UK law, companies can only make distributions if they have sufficient “distributable reserves” – or accumulated and realized profits – to do so

–          Paying dividends out of capital is illegal, as it can disadvantage other creditors, and can lead the directors to have to repay any illegitimate distributions they make

–          Impairing goodwill means writing down the carry value of a subsidiary and hence reduces shareholders’ funds – and the distributable reserves the parent company has available

Distressed debt tempts investors in anticipation of the next downturn – Pg. 19

–          A growing number of US hedge funds specializing in distressed debt are rising money in anticipation that the next economic downturn will punish companies that have borrowed record amounts since the financial crisis

–          Distressed debt investors make money buying assets they believe have fallen too sharply in price, typically during periods of economic stress

–          US corporate bond sales have run at more than $1tn annually since 2009, prompting warnings that such reliance on debt will help trigger the next downturn

Answer: (1) It’s actually easier than you think; (2) You will ‘wing’ it a lot more than you did with your first child; (3) Your firstborn might revert to baby behavior to get attention; (4) delivery hurts like hell the second time; (5) Doing ‘all the right things’ seems less important; (6) The baby book still won’t get done; (7) Breastfeeding issues do not magically disappear; (8) You will be OK with your kids eating the food in the car; (9) Even in your worst moments, you will still love being a parent; (10) You need your family and extended family more than ever; (11) Time with your partner becomes more important; (12) Kids forgive and forget; (13) Siblings can love each other fiercely and it’s a beautiful thing