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Amortizing Goodwill

If a business with $500K of tangible assets is purchase for $1M, there is $500K of excess value - or "goodwill" - that appears on the balance sheet of the buying company. My understanding is that private companies can amortize goodwill on a 10-year straight-line basis for tax purposes. But the accounting standards do not allow you to amortize goodwill - only take "impairments" - so in effect you have to maintain two sets of books for tax versus GAAP accounting. What parts of the above are incorrect?

How does the above change for a company that trades on the public stock markets? Are they also allowed to take the 10 years of tax deductions?

Does anyone reading this happen to know how the above is treated for an Australian company that trades on the Australian public stock markets?

Reply to
W
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There are other classifications for business assets than tangible property and goodwill. And those other assets may have different amoritization times than goodwill.

My understanding is that under ?197 goodwill is amortized over 15 years.

And yes, many companies have separate sets of books for taxes, since tax accounting is not the same as generally accepted accounting principles.

I'm not aware that there is any difference - at least under ?197 the rules does not seem to vary based on the size of the company.

Are you wondering about this under Australian tax law, or US tax law?

Reply to
Stuart O. Bronstein

Under Australian tax law. I am evaluating an Australian company whose stock only trades on the Australian public exchange. They overpaid for most of their growth by buying other businesses at very high premiums. So they carry a lot of goodwill on their balance sheet, and I am wondering will they be able to amortize that away over time.

Reply to
W

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