How does goodwill impairment under local GAAP differ from IFRS?

Answer

Local GAAP goodwill treatment (in many jurisdictions):

Scheduled amortization over the estimated useful life; where that cannot be estimated reliably, a default period (often 10 years) applies. In practice, 5–15 years is used depending on the facts.
An additional write-down on a permanent impairment in value.
A write-up (reversal) is NOT permitted — the same point as IFRS. IFRS goodwill treatment: (1) NO scheduled amortization. (2) An annual impairment test (see the previous card). (3) NEVER a reversal. Valuation consequence: local-GAAP goodwill melts away automatically over 5–15 years → lower equity over time, lower reported EBIT during the PPA phase. IFRS goodwill stays on the balance sheet until an impairment is triggered.

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Example

$100m of goodwill from an acquisition.

Local GAAP (illustrative, assuming a 5-year useful life): $20m D&A p.a. for 5 years, an EBIT drag.

IFRS

0 D&A, EBIT unchanged (potentially a larger impairment in a crisis year).

Pitch tip

'Local-GAAP-to-IFRS bridge: add back goodwill amortization in the EBIT restatement for middle-market comps — typically a 2–5% EBIT shift'.