Deferred Tax Arising from Transactions with Businesses

The thesis deals with temporary differences arising from transactions with businesses. Special focus is placed on non-tax-deductible goodwill. While both IFRS and US GAAP forbid recognition of any deferred tax liabilities on non-tax-deductible goodwill, Czech accounting rules do not address this issue at all. The absence may potentially lead among entities to divergent treatment in practice. Therefore, the main goal of the thesis is to propose with the use of the analogy method a solution specific for Czech accounting system. First, the main ideas of the balance sheet approach are summarized. Afterwards, the initial recognition exception including goodwill in IFRS and US GAAP is thoroughly analysed and critically evaluated. Finally, the proposed solution is presented. Additionally, the thesis also briefly introduces the net-of-tax method. It is concluded that the arguments used by both IFRS and US GAAP for the exceptions are not entirely valid. Moreover, the exceptions implicitly lead to application of the net-of-tax method, which is, however, prohibited in both systems. Finally, it is concluded that adopting the exception for goodwill to the Czech accounting system is entirely possible only for share deals, while for mergers, divisions and deposits of businesses the accounting treatment will depend primarily on the valuation report.