Goodwill and Tier 1 capital

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

  1. shanlane

    shanlane Active Member


    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?


  2. Aleksander Hansen

    Aleksander Hansen Well-Known Member

    Yes, goodwill net of DTL should be deducted
  3. shanlane

    shanlane Active Member



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