At the date of acquisition there is no recognition of a deferred tax item in respect to goodwill because it is a residual amount and the recognition of a deferred tax item would:
A) decrease the profit on consolidation.
B) increase the profit on consolidation.
C) increase the carrying amount of goodwill.
D) decrease the carrying amount of goodwill.

Question

Quizplus · Accepted Answer

Goodwill is a residual amount calculated after recognizing all identifiable assets and liabilities, including deferred taxes. Recognizing a deferred tax item for goodwill would increase its carrying amount, as it would adjust the net assets to reflect the tax effects, thereby increasing the residual amount identified as goodwill.

At the Date of Acquisition There Is No Recognition of a Deferred