AOL Time Warner has said it will write off $54bn (£38bn) of assets in its accounts for the first three months of 2002.

It will be the biggest ever corporate write-down in a single three month period - roughly equal to the gross domestic product of Pakistan, Hungary or New Zealand, analysts said.

The write-down reflects the falling value of AOL's merger with Time Warner, the US media giant said in a filing to the stock market regulator.

"It's a reflection of the internet bubble," Youssef Sqauli, an analyst at First Albany in New York told the Washington Post.

"It paid too much for Time Warner assets."

AOL Time Warner shares closed down $0.86, or 3.5%, at $23.35 on Tuesday.

Paper marriage

The merger of internet whiz kid AOL with established media giant Time Warner was paid for with AOL's shares, which were worth about $67 each when the deal was struck.

The group's share price has fallen by more than a half since the merger was completed in January 2001 as the global economic slowdown eroded advertising revenue.

The record write-down has been prompted by new accounting rules for US-listed firms, AOL Time Warner said.

Rules tightened

In the past, firms whose assets turned out to be worth less than previously thought could write off the difference over many years.

Now, their accounts must be adjusted annually to reflect the current value of the assets.

AOL Time Warner has declined to comment on the write-down, which is within the range of $40bn to $60bn it suggested in January.

And analysts said that the write-down was unlikely to have much impact on the company's business.

"This is less than a non-event," said Raymond Katz of Bear Stearns in New York.

Gloomy prospects

Like other media firms, AOL Time Warner is pinning its hopes on signs of recovery in the US economy.

However, without a recovery in the group's performance during the year, the record write-down could lead to heavy annual losses in its full year accounts, analysts said.

In January, chief executive Gerald Levin gave a sober view of prospects for the coming year, saying the company's business plan assumed no recovery in the economy in 2002.

The group posted a loss of $1.8bn for the final quarter of 2001, which included a write down of $1.7bn for investments acquired in the merger.