A BRIEF HISTORY OF THE MEASUREMENT RULES REGARDING GOODWILL

1. THE TAX RULES: The tax rules did not allow amortization (i.e. the ratable expensing/deducting) of Goodwill until 1993 (actually, after 8/10/93). With minor exception due to transition tax laws in 1993, if a taxpayer made an acquisition prior to 1993 that gave rise to Goodwill, the Goodwill was not deductible and was forever left on the Balance Sheet, for tax purposes. Starting in 1993, the Internal Revenue allowed Goodwill that arose from an acquisition to be amortized (expensed/deducted) ratably over 15 years on a tax return; at the same time reducing Goodwill on the tax return Balance Sheet ratably over 15 years.