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The major changes to Vivendi's financial statements resulting from the adoption of U.S. accounting principles would "relate to nonrecurring income and goodwill."
——Jean-Marie Messier, VU Chairman
VU TO ADJUST BALANCE SHEET
Company Expects $1 Billion Write-Down
Vivendi Universal may announce a goodwill write-down of 14 billion to 15 billion euros ($12.12 billion to $13 billion) against first-quarter 2002 earnings when it reports its 2001 results Wednesday, a person familiar with the situation told The Wall Street Journal.

The massive potential write-down is the biggest balance-sheet adjustment expected from the French media company's shift this year to U.S. generally accepted accounting principles. Another major adjustment will affect Vivendi's debt load: The company's net debt is expected to rise by as much as 9 billion euros ($7.83 billion) as a result of the accounting shift, the paper said.

Vivendi's board, at a meeting Wednesday just before a news conference to present the company's 2001 results, will weigh whether to warn investors early about the large write-down. Vivendi could also decide to wait until later this year to announce the write-down, although it must account for it in its 2002 financial statements.

A spokesman for Vivendi declined to comment. But in a letter sent to employees Feb. 6, Vivendi Chairman Jean-Marie Messier said the major changes to Vivendi's financial statements resulting from the adoption of U.S. accounting principles would "relate to nonrecurring income and goodwill."

The Wall Street Journal said that if Mr. Messier opts to preannounce the big write-down Tuesday, the French company will be following the example of rival media conglomerate AOL Time Warner which has prepared investors for a huge goodwill write-down in the neighborhood of $50 billion against its first-quarter 2002 earnings. Similarly, radio and outdoor-advertising company Clear Channel estimated last month that it will take a pretax impairment charge of roughly $15 billion to $25 billion to deal with the overpayment of assets on its books.

These substantial write-offs are the result of rule changes that take effect this year for valuing goodwill assets in the U.S. In an acquisition, goodwill is the amount the acquirer pays above the value of the target's assets. Under the old rules, companies could write down goodwill gradually, over periods as long as 40 years. But under the new rules, the goodwill has to be written down entirely as soon as it is deemed overvalued.

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