Goodwill amortization & deferred taxes

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asousa87
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Goodwill amortization & deferred taxes

Post by asousa87 »

Hello all.

I have a question, sorry is it already been answered in a previous topic.
Example: Company A has a Goodwill and it is allowed to be amortized over 10 years from a tax perspective. For a Group level, Goodwill is not amortized and for group accounts the amortizations are reversed.
The group is also creating a deferred tax asset because there is a diference between the tax basis and the accouting basis. More, this diference will be offset when the impairments be recognized at a group level, because it is assumed that the Goodwill will not be the same indefinitly and at some point the group will probably have to book some impairments.

Is this procedure correct, namelly the deferred taxes approach?

Regards.
Artur.
JRSB
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Re: Goodwill amortization & deferred taxes

Post by JRSB »

No deferred tax on goodwill.
JRSB
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Re: Goodwill amortization & deferred taxes

Post by JRSB »

Well no DT assets anyway.
asousa87
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Re: Goodwill amortization & deferred taxes

Post by asousa87 »

No deferred taxes at the creation of the GW because it is assumed that the GW is not taxable accepted and because it is impossible to estimate (it will be as circule).
But in this case is taxable accepted even the depreciations. The problem are the amortizations and to the GW for the Group.
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Marek Muc
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Re: Goodwill amortization & deferred taxes

Post by Marek Muc »

See paras 21-21A of IAS 12
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Marek Muc
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Re: Goodwill amortization & deferred taxes

Post by Marek Muc »

wait wait, para 21B!

Deferred tax liabilities for taxable temporary differences relating to goodwill
are, however, recognised to the extent they do not arise from the initial
recognition of goodwill. For example, if in a business combination an entity
recognises goodwill of CU100 that is deductible for tax purposes at a rate of
20 per cent per year starting in the year of acquisition, the tax base of the
goodwill is CU100 on initial recognition and CU80 at the end of the year of
acquisition. If the carrying amount of goodwill at the end of the year of
acquisition remains unchanged at CU100, a taxable temporary difference of
CU20 arises at the end of that year. Because that taxable temporary difference
does not relate to the initial recognition of the goodwill, the resulting deferred
tax liability is recognised.
asousa87
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Re: Goodwill amortization & deferred taxes

Post by asousa87 »

So, yes, there should be recognized deferred taxes correct?

I read that but stay with some doubts even ;)
Because, at least for me, it is the first time i get this situation.

Regards.
Artur.
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Marek Muc
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Re: Goodwill amortization & deferred taxes

Post by Marek Muc »

yes, you recognise def tax liability for the amount amortised since initial recognition
JRSB
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Re: Goodwill amortization & deferred taxes

Post by JRSB »

So to be clear, you have a standalone company which has goodwill in it's own books? How did that arise, did it acquire some trade and assets as a business?

And in your country, for tax purposes you get an allowable deduction against tax for goodwill? Which country is that?
asousa87
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Re: Goodwill amortization & deferred taxes

Post by asousa87 »

JRSB wrote: 26 Dec 2020, 16:32 So to be clear, you have a standalone company which has goodwill in it's own books? How did that arise, did it acquire some trade and assets as a business?

And in your country, for tax purposes you get an allowable deduction against tax for goodwill? Which country is that?
Hello, yes, that is the case, the company acquired assets and liabilities as a business.
And for tax purposes it is allowed the Goodwill amortization.
In this case, the country is Poland.
Regards.

Artur.
pub_acco
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Re: Goodwill amortization & deferred taxes

Post by pub_acco »

I've seen in practice a similar situation where goodwill was amortized for the tax purpose at the separate FS level and related deferred taxes were recognized. But that was under US GAAP, though I guess similar accounting is expected under IFRS too :)
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