Business -> Goodwill

Goodwill

Income Tax Act s. 14(1)

When a corporation or individual taxpayer acquires a business, goodwill (an intangible asset) will be created if the purchaser pays more than the agreed-upon value of the fixed assets acquired.

Goodwill is calculated as the total cost of the acquired business minus the agreed-upon value of the assets acquired minus liabilities assumed.  Prior to 2002, for accounting purposes a portion of goodwill was required to be amortized, or written off, by a business on their income statement every year.  Beginning in 2002, the value of goodwill on the balance sheet need not be written down unless it is determined that there has been an impairment in the value of the goodwill.

For tax purposes, goodwill is considered eligible capital property, and can be written off in a manner similar to capital cost allowance.

Revised: October 26, 2023