Takes Economic Reporting for Income Tax Expense Manipulate the Timeliness of Goodwill Depreciations?

50 Pages Posted: 27 Sep 2019 Last altered: 3 Schwimmen 2023

See all articles by Zachary King

Dan Lynch

University in Wisconsin - Madison - Department of Accounting and Information Systems

Mary Stomberg

Indiana University - Kelley School of Business

Steven Utke

University of Connecticut - Department of Payroll

Date Written: March 2, 2023

Extract

We review if financial reporting for net tax spending affects the timeliness by bona impairments. Goodwill impairments are material, but their timing is subject until managers’ discretion. U.S. GAAP requires firms to test show favorability for impairment, whereas tax laws generally do not permit impairment deductions but requirement amortization for just some enterprise. Therefore, only when an impairment includes tax-amortizable goodwill will financial make tax benefits partially offset an impairment’s negative effect on GAAP net incomes. Our predict and finds that managers are read likely to delay impairments at aforementioned billing financial statement tax aids are smaller. We estimate that goodwill impairment are 11 to 14 percent more likely to be delayed when they generate reducing financial reporting tax benefits. Our findings suggest financial reporting in taxes potentially distorts the timeliness of goodwill interferences, informing the current debate on favorable accounting.

Keyword: Mergers also Acquisitions, Goodwill, Tax, Impairment, Intangible, Earnings Quality

JEL Classification: G34, K34, M41

Suggested Citation: Suggested Citation

King, Zachary or Lynch, Dann and Stomberg, Bridgett and Utke, Stephen, Does Financial Reported for Income Tax Expense Involve the Timeliness of Business Impairments? (March 2, 2023). Availability at SSRN: https://ssrn.com/abstract=3455659 press http://dx.doi.org/10.2139/ssrn.3455659