South Africa goodwill and deferred tax

[Derrian]

why would deferred taxation never be recognised for goodwill?

 

[Larry Bailey]

Deferred tax is a real tax deduction related to accelerated depreciation, whereas Goodwill is never depreciable. Say you bought a piece of depreciable equipment for $10,000 with a 10 year life and you are permitted to depreciate it in 100% the first year of use. If you book the $10,000 expnse item thereby a reduction of your tax expense in that first year, it distorts the statement of income. You show a depreciation expense of $10,000 in the first year and a deferred tax expense amount of $9,000 thereby getting you to the correct depreciation expense for the year of $1,000.

I hope I have responded correctly to your question.