Amortization issue is laid to rest - amortization of intangible assets such as magazine's customer lists and databases - Brief Article

Folio: The Magazine for Magazine Management, Sept 15, 1993

A major bone of contention between publishers and the Internal Revenue Service--haggling over the amortization of intangible assets like customer lists and databases--is no more, thanks to the Clinton Administration's budget. The new legislation fixes the depreciation period of all intangible assets at 15 years.

That length of time is considered rather long in depreciation terms, but the bill allows businesses to amortize goodwill and other assets they previously could not write off. "It's a reasonable compromise," says Paul Scherer, managing partner of Scherer & Co., the accounting firm that represents Advance Publications and Conde Nast Publications Inc. The legislation will generally be revenue-neutral for publishers, but "the bigger the percentage of the purchase price goodwill is, the more advantageous this legislation is," adds Scherer. The legislation also removes a source of on-going dispute between publishers and the IRS: the question of what assets can be depreciated and over what time period. "It was a major area that was very muddy," says Charles McCurdy, president of K-III Communications Corp., parent of K-III Magazines. Advance Publications recently won a decade-long court battle over subscriber-list amortization (Supreme Court decision has publishers' goodwill, FOLIO:, June 1, 1993, page 21)--and is thrilled that future battles can be avoided. "It's completely moot, and I thank the Lord for that," says Scherer.