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How tax and financial reporting for intangible assets changes under new law
Author(s) -
DennisEscoffier Shirley,
Munter Paul
Publication year - 1994
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.3970050302
Subject(s) - goodwill , business , balance sheet , accounting , book value , intangible asset , finance , capital asset , asset (computer security) , earnings , revenue , computer security , computer science
Historically, there has been a significant divergence in the accounting for intangible assets—particularly acquired goodwill— for tax purposes from that used for financial reporting purposes. While a company that acquires implied goodwill in a purchase combination will reflect that in the consolidated balance sheet and amortize the acquired goodwill through subsequent earnings, for tax purposes, the goodwill amount, generally, has not been deductible. This has led companies to look to assign a portion of the acquisition price to alternative asset items such as customer lists and other identifiable intangible assets. The Revenue Reconciliation Act of 1993 radically changed the tax treatment of goodwill and other intangible assets. This article explores the implications of this change.