Under the provisions of the new rule, known as FAS 142, which came into effect at the beginning of January, AOLTW is required to write off excess goodwill from the merger between America Online (AOL) and Time Warner. Goodwill is the difference between the price paid to acquire a company and the calculated value of the acquired company's assets.
When the merger agreement between AOL and Time Warner was first announced, the two companies valued the all-stock transaction at $350bn. That deal was made at a time when the price of shares in both AOL and Time Warner were riding high.
In line with FAS 142, AOLTW is currently re-evaluating the value of the transaction and expects to take the one-off charge of up to $60bn to reflect the decline in the value of its stock since January 2000.
Despite the massive value of the write-off, the charge does not affect the company's operations, AOLTW said in a statement.