U6 - 01

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The table below shows the differences in accounting treatments for goodwill in three selected countries.

 

Accounting for goodwill in selected countries:

 

Country

Option to expense
immediately

Option to charge to
equity

Tax deductible

United States

No

No

No*

Canada

No

No

Yes

Great Britain

No

Yes

No

 

 *Goodwill is tax deductible in the United States under limited circumstances; for the purposes of this question, assume it is not.

 

Given a company that has recognized significant acquisition goodwill, identify the country whose accounting and tax rules for goodwill would likely result in the highest valuation of the company. Justify, explain, and discuss your answer.

 

Additional Question:

 

Every day the United States is losing jobs overseas because companies are looking for lower taxes, cheap labor, and fewer rules and regulations.  If taxes are a major concern to your company which country above would you move your company to?  Why?

 

Response should be in about 500 words.

 

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