# Goodwill and Tier 1 capital

Discussion in 'P2.T7. Basel II & Regulatory' started by shanlane, Jul 24, 2012.

1. ### shanlaneActive Member

Hello,

I am trying to make sense of the fact that we reduce Tier 1 capital by the amount of goodwill on a balance sheet. Could someone please take a look at this and let me know if I am on the right track?

ABC has $100MM in tier 1 capital. It buys XYZ for$50MM, but it only has assets worth $20MM. Instead of saying that ABC has$150MM in Tier 1 capital, it only has \$120MM.

I know this is a gross oversimplification, but is my thought process correct?

Thanks!

Shannon

2. ### Aleksander HansenWell-Known Member

Yes, goodwill net of DTL should be deducted

Thanks!

Shannon