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Personal Finance Case 2-2

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Personal Finance Case 2-2
Case 2-2:
1. With respect to the adjustments related to goodwill, answer the following:
a. Why does the adjustment for goodwill amortization increase net income under Country A GAAP but decrease net income under Country B GAAP?
The adjustment for goodwill amortization increases net income under Country A GAAP but decrease net income under Country B GAAP because of how SKD amortizes goodwill for a period of 20 years while for Country B goodwill is only amortized for a period of 5 years. This leads to a greater amount to be amortized by Country B since their period is shorter, leading to a decrease in Country B’s GAAP net income. Now, Country A’s GAAP has an increase in their net income because of how goodwill is not amortized for Country A.
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