Goodwill and Tier 1 capital

[shanlane]

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

 

[Aleksander Hansen]

Yes, goodwill net of DTL should be deducted

 

[shanlane]

Thanks!

Shannon