May 23 (Bloomberg) -- In the past few weeks, ``Late Show'' host David Letterman has used his Top Ten lists to lampoon drunken teachers, Hillary Clinton and even the Weather Channel. Here's another candidate for you, Dave: CBS Corp.'s balance sheet.

While his bosses at CBS might believe their company's asset values, Mr. Market doesn't. And I doubt Edward R. Murrow would either.

The math is so simple, Katie Couric could sound-bite it. At $23 a share, CBS has a stock-market value of $15.7 billion. Yet to believe CBS's books, just one of the company's assets, goodwill, by itself was worth $18.5 billion as of March 31.

So, on paper, this single, pneumatic intangible supposedly is more valuable than the company as a whole.

As they used to say on CBS's old show ``The Twilight Zone,'' you are now traveling through another dimension. If CBS's audits were an episode of ``Survivor,'' a bunch of that goodwill would have been voted off the island by now.

And what is goodwill? You're breathing it.

Goodwill is nothing more than a ledger entry, representing the premium that one company pays to buy another. Specifically, it's the difference between the purchase price and the fair value of the acquired company's net assets. The more you pay, the more goodwill you get. It can't be sold by itself, either. Hence, the term's synonym: air.

CBS acquired the bulk of its goodwill through its 2000 purchase of -- strangely enough -- CBS.

Done It Before

At the time, CBS, the purchaser, was called Viacom Inc. When it split into two publicly traded companies at the end of 2005, the new company took the Viacom name along with cable-network and entertainment brands like MTV Networks and Paramount Pictures. The old company was renamed CBS and includes the CBS television and radio networks. Both companies are based in New York and controlled by Sumner Redstone, who is chairman at each.

CBS has taken big goodwill writedowns before, including a $9.5 billion charge to earnings in 2005.

Meanwhile, CBS's stock has declined 27 percent in the past year and trades for about 71 percent of book value, or assets minus liabilities. The discount tells you the market is expecting more writedowns soon, perhaps $6 billion worth, judging by the difference between CBS's book value and market capitalization.

And no wonder. Goodwill represented 85 percent of CBS's $21.7 billion book value at March 31. That doesn't include about $10 billion of other intangible assets, mostly Federal Communications Commission licenses. CBS is poised to add even more goodwill to its books. This month it agreed to buy online news provider Cnet Networks Inc. for $1.8 billion, or about 3.6 times book value.

Mind the Gap

While a large gap between a company's market capitalization and book value doesn't automatically trigger writedowns, it's a strong indicator that the market values for a company's assets have fallen a lot.

In the section of its latest annual report disclosing risk factors, CBS said it ``could suffer losses due to asset impairment charges for goodwill, intangible assets, FCC licenses and programming.'' Such charges matter because they mean a company's executives have cut their forecasts for future cash flows, signaling worse trouble ahead.

A CBS spokesman, Dana McClintock, declined to comment. Of course, the guy I'd really like to hear from is Letterman. He could have a field day with this.

Why let him have all the fun, though? Turnabout is fair play. And after all these years, it's time CBS got a taste of Dave's own medicine. So, here we go.

Top Ten CBS Excuses for Avoiding Big Writedowns:

10. Shh! You'll wake Mr. Redstone.

9. We get our figures watching ``The Price Is Right.''

8. Ben Bernanke is letting us swap goodwill for Treasuries.

7. Our CFO is busy watching ``American Idol'' on Fox.

6. You mean that's $18 BILLION? With a B?

5. We put the cast from ``Numb3rs'' in charge.

4. Ratings boost: We're dumping Andy Rooney for Britney.

3. Moody's and S&P rate Katie Couric AAA.

2. Bear Stearns says the worst is behind us.

1. Dave's got a turnaround plan!

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Jonathan Weil in Boulder, Colorado, at jweil6@bloomberg.net

Last Updated: May 23, 2008 03:11 EDT