AOL blames massive loss on accounting rule
Media giant AOL Time Warner has posted a phenomenal first quarter net loss of $54.2bn (£37.2bn), the result of a one-off accounting charge on goodwill, incurred through the merger of AOL and Time Warner.
According to the company, ‘the first-quarter adoption of FAS 142 resulted in a one-time, non-cash charge that reduced the carrying value of the company’s goodwill by approximately $54bn’.
FAS 142, effective from 1 January 2002, means that the company must record the one-off hit following the $350bn merger of AOL and Time Warner.
AOL Timew Warner said as a result of this accounting change, the company incurred a net loss of $54.2bn for the quarter, or a loss of $12.25 per basic common share
The loss is the largest quarterly net loss in American corporate history and is equivalent to the gross domestic product of a country such as Hungary or the Czech Republic.
The company, which owns news network CNN, magazines and TV shows, including the blockbuster mafia show The Sopranos, also cut its outlook for the AOL group for the third time since its merger last year.
AOL is one of the group’s poorest performing branches and the company once again blamed falling advertising revenues for the massive losses, which compared to a $1.37bn loss in the corresponding quarter of 2001.
AOL chief operating officer Robert Pittman said he understood concerns and was in the process of building a new team to take the group forward.
‘Our goal is to be in the growth mode in the second half of the year, and then get back our real momentum in 2003,’ he told Reuters.