Business Combinations, Goodwill and Deferred Taxes: Evidences Emerging From a Comparative Analysis Between Italy and Bulgaria

The starting point for the research was the evidence of a possible contradiction in the provisions of IAS 12 on goodwill and deferred income taxes, i.e., about the need to calculate deferred income taxation on temporary differences relating to all assets except for goodwill. This paper aims at exploring the degree of consistency between the theoretical provisions of International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) and their actual application by the management of Italian and Bulgarian listed companies, as regards the accounting treatments of deferred income taxes relating to the item “goodwill”. The findings suggest that there are some differences between the accounting methods used by the management of most Italian listed companies and the provisions of IAS/IFRS. It can be argued that the rules given by IAS/IFRS are sometimes contradictory, since they may cause doubts in interpretation. As a consequence, in the end of the paper, an amendment to the provisions, set forth in IAS/IFRS concerning the accounting treatment of deferred income taxes relating to the item “goodwill”, is proposed.