New regs boost AOL

Restructuring to continue

AOL Time Warner foresees new accounting rules boosting its annual profit by $5.9 billion while acknowledging that a restructuring initiated shortly after its merger will continue into the second half of the year.

According to a filing with the Securities & Exchange Commission, AOL TW took a $65 million restructuring charge in the second quarter. The bulk of revamp costs fell in the first quarter with a $965 million hit.

America Online and Time Warner merged in January. Shortly after, it announced 2,400 layoffs companywide and plans to shutter or sell the Warner Bros. retail stores — which employ about 3,800. Additional layoffs, up to 1,000, are likely to be announced soon at the AOL Internet unit in Dulles, Va.

Cut coin

Termination payments totaled about $95 million in the second quarter.

Meanwhile, the company’s bottom line will perk up from new accounting rules, which took effect in July. Regs say companies don’t have to write off goodwill, which is the difference between the price paid for an acquired asset and the liquidation value of that asset. Companies that are acquisitive usually amortize goodwill over a number of years and have seen those charges cut into their reported profits.

It’s a reason why some big earnings-focused players like Walt Disney and General Electric have shied away from hefty acquisitions; now they will be freer to pursue deals.

(Reuters contributed to this report.)

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