Business Case Studies & Business Publications

The Treatment of Goodwill and Other Purc...

Frank, Mary Margar...

Technical Note

The Treatment of Goodwill and Other Purchased Intangibles for Tax Purposes

Frank, Mary Margaret

C-2258 | Published August 29, 2007 | 9 pages Technical Note

Collection: Darden School of Business

Product Details

This technical note outlines the effect of Section 197 of the Internal Revenue Code on goodwill and other intangibles purchased in an acquisition by comparing the treatment of goodwill and other purchased intangibles for tax and financial accounting purposes. The residual method, contingent payments, and recapture taxes are also briefly discussed. These tax laws affect current and future cash flows to the acquirer and target shareholders and as a result can affect the price and optimal structure of a deal.