Question on Calculating EBITDA for Healthcare companies

[wstguest]

Hope all is well. I’m working on a credit review for a healthcarecompany and was wondering why it is standard practice for companies to leave out charges for in process research and development stemming from acquisitions when calculating earnings from continuing operations. I would think that atleast some of these costs would be considered to be recurring since the company is going to be absorbing these costs after integrating the new business / product line into their operations. If you have some time, any thoughts you had on this issue would be much appreciated.

[wstexpert]

Possible answers (guesses) since I'm not healthcar specific:
1) one-time acquisition and as such, its not part of continuing ops
2) IPRD is an expense that the target company has already paid for and as such, is simply an accounting entry but has no impact on cash and thus no economic impact on profits
3) New merger accounting rules FASB 141R in effect beginning of 2009 state that IPRD is now capitalized on the BS and not expensed. So when it is expensed (matching principle of accounting) it's not affecting your core profit since its an accounting treatment.

[wstexpert]

To clarify on #3, old rules stated IPRD is expensed so its a merger adjustment to opening BS and as such, never hits future IS. So ppl generally like making changes to reverse new accounting rules until is 100% accepted by entire finance community and again, calculating normalized EBITDA.