Why don't most companies just write down their goodwill whenever they want to reduce their taxable income?

If writing down goodwill is an expense and in turn reduces your taxable income, why don't more companies do it at their discretion? Do they have to legally prove the goodwill is worth less before they can?

Help me make sense of this.

4 Comments
 
Most Helpful

Few things here:

  1. Just because you have GAAP goodwill doesn’t mean you have amortizable tax goodwill. You generally only have amortizable goodwill for tax purposes when doing asset deals; get nothing for stock deals.
  1. Even if you have have tax goodwill, you have to follow tax rules for amortizing it — generally straight line over 15 years. Can’t choose how it gets written off.

Hope that helps.

 

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