Question

How is goodwill amortized? Multiple Choice It is not amortized for reporting purposes or for tax purposes. ) It is not amortized for reporting purposes, but is amortized over a 5-year life for tax purposes. It is not amortized for tax purposes, but is amortized over a 5-year life for reporting purposes. Oo oo C ) It is not amortized for tax purposes, but is amortized over a 15-year life for reporting purposes. It is not amortized for reporting purposes, but is amortized over a 15-year life for tax purposes.

Answer 1

Ans 1.

Under US GAAP and IFRS, goodwill is never amortized, because it is considered to have an indefinite useful life. Instead, management is responsible for valuing goodwill every year and to determine if an impairment is required. Hence the Option 1 is correct ie it is not amortized for reporting purposes or for tax purposes

Ans 2.

An affiliated group electing to file a consolidated return may substantially alter its combined overall tax liability. Like a consolidated return ignores sales between connected corporations. Deferment of taxable gains or losses become realized with the ultimate sale to an outside third party. However, once losses are recognized, losses of one affiliated corporation can be used to offset income of another. Accordingly, the effect of filing a consolidated return on each member, and the affiliated group as a whole, are complicated and should be carefully considered before making the election. The associated group should consider its eligibility, its overall tax liability relative to separate filings, and the election’s effect on future years. Accordingly Option 1 is correct ie.there are no intra-entity transfers