i think that the average investor has no idea what "goodwill" represents. It is my understanding that "goodwill" is the "premium" to book value paid for companies when they are acquired. "Goodwill" is also depreciated as an asset by the acquirer over some period of time which makes it an annual expense that is "paid for" by the acquirer. Therefore it only becomes a factor if DHR decides to sell an acquisition before the associated goodwill is fully depreciated and the company is sold for less than the book plus goodwill value.
What you should look at is earnings, cash flow and free cash.. These are above and beyond the depreciated goodwill for the year. DHR shines in this regard.
Comments welcome from Finance Gurus (bean counters!!!)
Followup- someone erroneously posted that goodwill was not depreciated.(that posting apparently was removed) That is incorrect. Goodwill is depreciated (amortized) over 40 years. Cash flow and free cash are still strong points for DHR.
>>"Goodwill" is also depreciated as an asset by the acquirer over some period of time which makes it an annual expense that is "paid for" by the acquirer.<<
Not true anymore. Per FAS 142, adopted in 2002, goodwill remains on the books and is not amortized. Each year the company performs a valuation analysis on the goodwill. If the future cash flows (which as very subjective) is higher than the carrying value of the goodwill, no impairment is recorded. If the cash flows are less, the goodwill is adjusted down to the future cash flows. Do I think Danaher should have written off goodwill this year? Absolutely. I can't believe for a second that all the acquisitions that generated goodwill since 2002, have the cash flows to support it. They should have taken the opportunity to clean up their balance sheet a bit. Eventually, no matter what, all of that $9.3 billion will have to be written off. The question is whether its going to be next year, five years or twenty years from now.
As a former accountant myself, you all are really missing the point on Danaher and Goodwill. Irrespective of the very effective asset removal machine that DHR employs in "liberating" wasted capital to finance buying more companies, Goodwill is where all of the former "Associates" are going to be doing their back to school shopping. DHR fully supports the LCRs after any requisite brands are siphoned off.