EBA · 2023_6768 Rejected question

Negative Goodwill

Regulation
Directive 2013/36/EU (CRD)
Article
80
Topic
Own funds
Submitted by
Accounting firm
Submitted
2023-04-03
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Question

Positive Goodlwill ie where a firm has purchased an entity above book value, is deducted from CET1 to determine the elligible capital balance. However how should Negative Goodwill be treated ie where a firm has purchased an entity at a discount? The profit on the purchase goes through the purchasing firm's P&L so does that mean negative goodwill is elligible to be included in CET1 capital?

Background

Banking mergers where the use of the resolvability tools may result in an entity being sold to another organisation at a discount to book value.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2023_6768

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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