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Accounting rule change could boost AT&T/Time Warner synergies

Published 11/07/2016, 08:07 PM
Accounting rule change could boost AT&T/Time Warner synergies
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  • The synergies from AT&T's (T +0.9%) $85B deal for Time Warner (TWX +1.5%) could be that much sweeter due to an accounting change coming to revenue recognition in 2018 (and using lessons AT&T learned in the DirecTV deal).
  • The new standard affects recognizing revenues from customer contracts, creating issues for companies that feature factors like tiered pricing, volume discounts and other marketing offers, and contract modifications along with other contract terms.
  • AT&T and Time Warner expect synergies of $1B within three years of closing. But aside from how the new standards affect stand-alone AT&T (such as allocating and timing of revenues between services and handsets), Time Warner sports a programming licensing backlog of $6.9B.
  • That's future revenue not yet recognized, and under the new standard licenses could be treated as transferable rights, MarketWatch notes. And that could give AT&T closer control over measurement of deferred taxes and income taxes (along with a positive effect on shareholder equity).

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