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Accounting for Goodwill in Selected Countries

The table below shows the differences in accounting treatments for goodwill in three selected countries.

Accounting for goodwill in selected countries

United States - No-to expense immediately; No-to charge to equity; No*-tax deductible

Canada - No-to expense immediately; No-to charge to equity; Yes-tax deductible

Great Britain - No-to expense immediately; Yes-to charge to equity; No-tax deductible

*Goodwill is tax deductible in the United States under limited circumstances; for the purposes of this question, assume it is not.

Given a company that has recognized significant acquisition goodwill, identify the country whose accounting and tax rules for goodwill would likely result in the highest valuation of the company. Justify, explain, and discuss your answer.

Solution Preview

Canada offers the company the best options regarding goodwill. Under Canada's accounting rules, goodwill will not impact the company's current or future earnings ...

Solution Summary

This solution discusses the impact of the accounting standards for goodwill in the U.S., Canada and the U.K. on a company's earnings.