Deferred tax asset creation during non tax-deductible goodwill impairment

DTAs/DTLs always mess with my head a little and I'm trying to understand how they factor in during the recognition of goodwill impairment when it is not tax-deductible.

Let's say a company impairs goodwill by $100. This will reduce pre-tax income by $100 and thus reduce net income by $80 assuming a 20% tax rate. Thus, from the I/S it appears we're paying $20 less in tax than actual IRS tax accounting would show.

So, on the CFS, it makes sense to me that we would add back the full $100 for the impairment as it is a non-cash expense, and subtract $20 for the cash taxes not reflected by the IS, and therefore with net income down 80 to begin with, there's no net change in cash.

So now turning to the balance sheet, cash is unchanged, goodwill is down $100, and net income is down $80. According to BIWS guides, this is balanced out by the creation of a $20 deferred tax asset. My question is - why is this asset created? What does it actually mean? Does it actually represent some sort of material cash tax savings in the future? Because in my mind, our cash taxes aren't changing, they're just going to be higher than book taxes for this one year and then after that everything is the same since I'm assuming goodwill isn't amortized.

1 Comments
 

At est est consequuntur quia. Quia et quisquam rerum temporibus et. Voluptas pariatur rerum itaque natus in sunt. Aliquid assumenda unde omnis aliquid reiciendis optio occaecati.

Quae ea voluptates omnis iure. Quos et aut fuga. Quaerat ullam accusantium perspiciatis ea.

Dolores inventore excepturi sed iste deleniti occaecati suscipit dicta. Veritatis accusamus odio dolores enim consequatur impedit deleniti. Earum dolorem aut voluptatem enim et facilis. Et impedit blanditiis distinctio maxime impedit officiis et minima. Aut neque debitis nostrum consequatur ex nemo.

Commodi nostrum id quod debitis eum expedita incidunt. Fuga odio et minima doloremque omnis accusantium sit. Nulla veritatis ut magnam excepturi.

Career Advancement Opportunities

July 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.9%
  • JPMorgan 01 98.3%
  • Guggenheim Partners 01 97.7%
  • Morgan Stanley 07 97.1%

Overall Employee Satisfaction

July 2026 Investment Banking

  • Moelis & Company No 99.4%
  • Morgan Stanley 02 98.9%
  • Evercore 01 98.3%
  • BMO Capital Markets 12 97.7%
  • Banco Santander 01 97.1%

Professional Growth Opportunities

July 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.9%
  • Morgan Stanley 06 98.3%
  • Goldman Sachs 01 97.7%
  • JPMorgan 01 97.1%

Total Avg Compensation

July 2026 Investment Banking

  • Vice President (15) $434
  • Associates (46) $258
  • 3rd+ Year Analyst (8) $210
  • 2nd Year Analyst (22) $179
  • Intern/Summer Associate (13) $156
  • 1st Year Analyst (79) $150
  • Intern/Summer Analyst (73) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
kanon's picture
kanon
99.0
3
Secyh62's picture
Secyh62
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
Betsy Massar's picture
Betsy Massar
98.9
7
DrApeman's picture
DrApeman
98.9
8
GameTheory's picture
GameTheory
98.9
9
CompBanker's picture
CompBanker
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”