Goodwill offset against equity

CFA Level II FRA
#1

Hello,

Has anyone understood what goodwill offset against equity is and means?

Usually seeing goodwill as asset account, so wonder if and when goodwill is offset? Do companies have a choice?

Thank you

#2

Has anyone come across this? thanks

#3

Don’t know this in CFA context, but in LBO/M&A we normally price the Tangible Equity which is Equity net of existing goodwill and create a new goodwill which is the difference between Purchase Price and difference between market value of Net Assets (asset write ups etc). It is also in line with Purchase Accounting. In other words, we make existing goodwill zero as buyer do not pay for existing goodwill and reduce the equity with the same amount.

#4

I am not sure I saw it in L2, but goodwill is often adjusted (along with DTA) against equity to account for spurious valuation. Both assets and equity decline.