IAS 12Chapter 4Lesson 3
Goodwill: the exception, deductible goodwill and a higher tax base
Step 1 of 8Learning objectives
Go deeper+2 deeper insights · +1 journal entry · +1 point of attention
When goodwill is not deductible, its tax base is nil: the difference is taxable, but the standard prohibits recognising the deferred tax liability arising from its initial recognition, because it would increase a residual amount. Subsequent reductions of that unrecognised liability are not recognised either. However, a difference that does not arise from initial recognition (deductible goodwill amortised for tax) gives a liability; a tax base higher than the carrying amount gives an asset, if recoverable.
20 minNot started
Learning objectives
- Explain why no deferred tax liability is recognised on the initial recognition of non-deductible goodwill.
- Deal with subsequent reductions of the unrecognised liability (goodwill impairment).
- Calculate the deferred tax of tax-deductible goodwill after its initial recognition.
- Determine the deferred tax asset of goodwill whose tax base exceeds its carrying amount.