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Boston Scientific Corporation Message Board

  • Stock_Detective Stock_Detective Nov 3, 1998 11:28 PM Flag

    Comments

    I cannot imagine this stock closing any lower
    than $40. This has been a support level on three
    separate occasions dating back to '96. On an intraday
    basis, violation of 37 would be a serious, serious
    source of concern for those who are long with a short
    term view. It would suggest that previous support is
    not going to hold and that the next area of support
    of mention is in the mid 20's.

    The manner in
    which BSX handled the NIR on Sox situation does not
    give one confidence that they will handle "accounting
    irregularities" any better. However, if they have watched the
    market lately and learned anything from the CD situation
    they will take their time, do a total assessment and
    then dump all the garbage out at one time. As a
    previous poster implied, accounting problems are like
    cockroaches. The presence of one implies there are more.
    Rightly or wrongly this is how the Street seems to view
    these things.

    More later.

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    • BSX is a very aggressive company that has done
      very well. I have a question for the board. In the
      past many analyst have stated that the accounting
      cards at this firm have been very aggressive and could
      indicate potential problems. The analyst were in no way
      indicating what has just happened in Japan. But they stated
      that the use of writeoffs for R&D and goodwill from
      companies they have aquired has been very aggressive. It is
      in no way illegal but pushes the envelope.

      I
      am not trying to jump on BSX's back when things are
      down but trying to evaluate possible puchases of the
      stock. Can anyone who maybe aquainted with this company
      comment?

      Thanks,
      Mike

      • 2 Replies to mhattrik98
      • I am not as familiar with BSX as I should be (I
        hold a small investment) but I am familiar with
        accounting issues.

        Many high tech and high growth
        firms have been questioned for "aggressive" accounting
        issues. The issues you raise are NOT specific to BSX. The
        SEC is currently looking at changing guideliness
        (possibly/probably in 1999) relative to goodwill and R&D. This
        affects many companies including Cisco, etc., not just
        BSX

        Some of the issues...R&D internally generated is
        required to be expensed as incurred (SFAS #2). When a high
        tech company is purchased, the purchase price includes
        the value of the intangible asset generated by R&D at
        the acquired company. That intangible, as well as
        other intangibles such as reputation, location, brand
        recognition, etc. are all included in goodwill, which is
        operationally defined as the excess of purchase price over the
        fair market value of the IDENTIFIABLE net assets
        (goodwill is not separately identifiable, so once
        everything possible has been identified, goodwill is what is
        left).

        So, companies buy Goodwill, which
        includes the future benefit of R&D, which if internally
        generated would have been written off. They come up with a
        valuation for future R&D benefits (Arthur Andersen/Andersen
        Consulting has a group that specializes in this, for
        instance) and write it off to maintain comparability with
        fimrs that have generated internal goodwill. This is
        also more consistent with international practice on
        goodwill (for example, in Britain, Goodwill is immediately
        written off against stockholders' equity and never hits
        the income statment at all. Some countries leave
        goodwill on the balance sheet indefinitely and never
        amortize it to expense, again keeping it off the income
        statement).

        There are some that feel the current
        practice (again, practiced by most,not just BSX) is too
        aggressive. Others feel that to be comparable with other
        companies it is very appropriate, and if you are going to
        be competitive in the global economy, even more
        important. There is some feeling that US firms have been at
        a competitive disadvantage with British firms in
        the merger and acquisitions arena because of the
        differences in rules. And if affects not just the current
        year..it affects as many future years as it takes to write
        off Goodwill...up to 40 in the US, although most
        would write it off in 5. It distorts return on assets
        as well. I personally strongly disagree with the SEC
        on this one (I am an accounting professor at a major
        state university, and I specialize in financial
        accounting and international accounting). Accounting for
        intangibles is the most important (IMHO) issue facing the
        accounting profession today, and there are no really good
        answers that give us a "fair presentation" of the
        financial statements of ABC Company as long as we use
        historical cost and require some firms to write off
        intangibles as teh expenses are incurred and require others,
        who have been involved in merger and acquisition
        activity, to value those same assets as fair market value
        as defined by the merger price.

      • 11/04 9:27A (DJ) *Boston Sci (BSX) Ind: 45 3/8-47 3/8. Last 46 3/8

 
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