Copenhagen Stock Exchange - Focus: New Accounting Standards May Result In Rising Prices

As from 2005, the Danish companies shall no longer amortise goodwill systematically, and a good few companies will thus look cheaper measured by the classic P/E ratio. The new accounting rules will not influence the estimated fair value of the companies. Nevertheless, it will boost movements in the prices of these companies, assesses Equity Analyst Rune Møller, Jyske Markets in Focus no. 90.

Rune Møller illustrates the changes in the 2004 P/E values of the KFX companies assuming that the companies had not amortised goodwill. The scene is set for major changes to this financial ratio for a number of companies.

The future accounting rules without systematic amortisation of goodwill will according to Rune Møller give a truer and fairer view of a company’s financial development.

Read more about the topic in ’New accounting standards may result in rising prices’ in Focus no. 90.