Asset Writeup?
What happens to EV when an asset is written up? What happens to goodwill? Assuming company is 1 asset and there is a goodwill balance greater than the write up.
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An asset write-up creates a deferred tax liability because you'll have a higher depreciation expense on the new asset, which means you save on taxes in the short-term - but eventually, you'll have to pay them back, hence the liability. The opposite applies to an asset write-down and a deferred tax asset.
Got it - but if there is an asset worth 200 and goodwill of 100 and the asset is written up 50, does goodwill decrease by 50? Or does the total value (BV plus goodwill) just increase to 350?
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