[win2bet]

NINJA Question –

This is a rather confusing issue since as I understand private companies amortize goodwill over 15 years, while public companies simply test for impairment annually.

There was a question in the Ninja MCQ:

Gem Corp. purchased all the assets of a sole proprietorship, including the following intangible assets:

Goodwill $50,000

Covenant not to compete 13,000

For tax purposes, what amount of these purchased intangible assets should Gem amortize over the specific statutory cost recovery periods?

The correct answer is 63,000. But in general, is my thinking misguided? I think it should be either 13,000 or 0.

REG 68,87
BEC 85
FAR 75
AUD 64,64, 86!

[taxgeek83]

Goodwill is amortizabke for tax purposes, but not for financial accounting purposes.

[win2bet]

@taxgeek83 Thanks for clearing that up! makes sense

REG 68,87
BEC 85
FAR 75
AUD 64,64, 86!

[taxgeek83]

No problem! And I apologize for the misspelling – I was on my phone at the time. Auto correct doesn't always like me…. 🙂

[taxgeek83]

In other news (and to possibly confuse the issue further):

https://mcgladrey.com/content/mcgladrey/en_US/what-we-do/services/assurance/simplified-accounting-for-private-companies-goodwill.html

Maybe this is what you are referring to? I Googled it to make sure, and this is new to me. My understanding is that new pronouncements are not tested by the AICPA until 6 months after their implementation. It sounds like you might be taking REG, so the tax rule applies (goodwill is amortizable over 15 years). If you have not yet hit FAR, though, you might double check on that for financial accounting purposes once you get to that exam.

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