Unincorporated Minds

So if you have read or sen the news lately, you have heard about the companies taking a non-cash charge as a result of the healthcare reform bill.  The way this is worded is to intentionally mislead you into thinking this is a bad thing.  At first glance (or vocalization), it sounds like healthcare is costing these companies revenue.  That's not exactly the case.

For those who want to know what a non-cash charge is, from investopedia.com:

A charge off, made by a company against earnings, that does not require an initial outlay of cash.  Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. Companies take these charges against earnings due to extraordinary circumstances such as accounting policy changes or significant depreciation of asset's market value. Any sort of charge will usually result in lower earnings in the period when the charge was made. Sometimes also referred to as a write down.

So basically, they are taking a huge upfront expense. Yes, it lowers the earning. It is intentional. Lower earnings means less taxes to pay.  I have a hard time believing the amount of money companies are posting as non-cash charges are nearly as big as they state.  My gut feeling is that these companies are taking full advantage of a new law that has unclear business repercussions.  Please don't feel sorry or worried about these companies. My understanding is that most companies won't feel the effect of health care reform until at least two years down the road.

Maybe we should worry about companies not smart enough to game the system. As we shouldn't be surprised that big companies don't like to pay taxes.  Even though if they played straight, the extra tax revenue could really help the country.

My basic point here is these non-cash charges are strategic moves by these companies, not indicators that the sky is falling.

FYI, some of the companies the have huge write downs are:
Ingersoll : 41 million
AT&T: 1 Billion
Honeywell: 13 Million
3M: 90 Million 
Boeing: 150 Million
AK Steel: 31 Million

I don't know the corporate tax rate for those companies, but these write downs cost the USA taxes on 1.325 Billion dollars. I'm sure that would've helped more than my measly amount.