There isn’t one answer to how long goodwill is amortized — the period depends on who’s reporting and why. Public companies don’t amortize goodwill on their financial statements at all; they carry it indefinitely and test it for impairment. Private companies and not-for-profits can elect to amortize it on a straight-line basis over a maximum of 10 years. For federal income tax purposes, Section 197 of the Internal Revenue Code sets a fixed 15-year schedule regardless of entity type or business performance. Which number governs any given situation turns on two questions: what kind of entity owns the goodwill, and whether you’re looking at the books or the tax return.
The 15-Year Rule for Tax Purposes
Federal income tax treatment is the most uniform piece of the picture. Goodwill is a “Section 197 intangible” and must be amortized ratably over 15 years, beginning in the month of acquisition.1Office of the Law Revision Counsel. 26 USC 197 – Amortization of Goodwill and Certain Other Intangibles The schedule is fixed. You can’t accelerate the deduction, and the timeline doesn’t shift if the acquired business is thriving or failing. One-fifteenth comes off each year until the balance is gone.
Whether a buyer gets to take that deduction at all depends on how the deal was structured. An asset purchase gives the buyer a new tax basis in the acquired assets, including goodwill, and the 15-year clock starts right away. A straight stock purchase doesn’t — the buyer inherits the target’s existing tax basis with no step-up, so there’s no new goodwill to amortize. The parties can bridge this gap by making a joint election under Section 338(h)(10) or Section 336(e), which treats a stock sale as an asset sale for tax purposes and unlocks the 15-year deduction for the buyer.1Office of the Law Revision Counsel. 26 USC 197 – Amortization of Goodwill and Certain Other Intangibles That choice is one of the most consequential tax decisions in any acquisition.
Public Companies: No Amortization at All
On the GAAP financial statements of a public company, goodwill isn’t amortized. It sits on the balance sheet at its original cost and stays there until something goes wrong. This has been the rule since 2001, when FASB issued Statement 142 (now ASC Topic 350) and replaced the old approach of writing goodwill off over up to 40 years with an impairment-only model.2Financial Accounting Standards Board. Accounting Standards Update 2017-04 – Intangibles, Goodwill and Other (Topic 350)
The logic was that goodwill doesn’t wear out on a predictable schedule. A strong brand can hold its value for decades or collapse after a single scandal, and spreading the cost evenly over an arbitrary period didn’t reflect what was actually happening to the asset. In place of a recurring amortization expense, companies test goodwill for impairment at least once a year — and whenever a triggering event suggests the fair value of a reporting unit has dropped below its carrying amount. When fair value falls short, the company writes the goodwill down by the shortfall, capped at the amount of goodwill allocated to that unit. The write-down is permanent; even if performance recovers, the balance can’t be written back up.
The same prohibition on amortization applies under IFRS. IAS 36 requires annual impairment testing of goodwill at the cash-generating unit level, and impairments once recognized cannot be reversed.3IFRS Foundation. IAS 36 Impairment of Assets The IASB considered reintroducing amortization in its recent Business Combinations project and declined, concluding in its 2024 basis for conclusions that there was “no compelling case to justify reintroducing amortisation of goodwill.”4IFRS Foundation. Basis for Conclusions on Exposure Draft – Business Combinations, Disclosures, Goodwill and Impairment
Private Companies and Nonprofits: Up to 10 Years
Private companies got an alternative in 2014. Under ASU 2014-02, a private company can elect to amortize goodwill on a straight-line basis over 10 years, or over a shorter period if management can demonstrate the economic benefits will be consumed sooner. The useful life can be revised downward later, but the cumulative amortization period for any single unit of goodwill cannot exceed 10 years.5Financial Accounting Standards Board. Accounting Standards Update 2014-02 – Intangibles, Goodwill and Other (Topic 350): Accounting for Goodwill
FASB extended the same option to not-for-profit entities in 2019 through ASU 2019-06, using identical terms: straight-line amortization over the lesser of 10 years or a shorter demonstrated useful life.6Financial Accounting Standards Board. Accounting Standards Update 2019-06 – Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities A nonprofit that elects the alternative also folds certain identifiable intangible assets, like customer-related intangibles and noncompete agreements, into the goodwill balance rather than recognizing them separately.
The appeal of the election is practical. A full quantitative impairment test requires estimating the fair value of a reporting unit, which usually means outside valuation experts, discounted cash flow models, and comparable company analysis. Private companies and nonprofits often don’t have the internal resources or market data to do that rigorously each year. A predictable annual amortization expense replaces most of that complexity. Entities that elect amortization no longer run an annual impairment test; they only test when a triggering event occurs, and under ASU 2021-03 they can evaluate for triggering events at the end of each reporting period rather than monitoring continuously.7Financial Accounting Standards Board. Accounting Standards Update 2021-03 – Intangibles, Goodwill and Other (Topic 350)
Two constraints come with the election. It’s irrevocable — once a private company or nonprofit opts in, it can’t switch back to impairment-only. And it must be applied to all existing and future goodwill. You can’t pick and choose which acquisitions get amortized.
Why the Book Number and the Tax Number Don’t Match
Because GAAP and the tax code use different rules, the two systems rarely line up. A public company carries goodwill at original cost on its financial statements (reduced only by impairment) while simultaneously deducting one-fifteenth of that cost each year on its federal tax return. That mismatch generates a deferred tax liability that unwinds over the 15-year tax amortization period, unless a GAAP impairment charge changes the equation partway through.
Even a private company that elects the 10-year GAAP alternative will still see a book-tax gap: faster amortization on the books (10 years) than on the return (15 years) produces its own set of temporary differences. The 10-year election is a financial-reporting choice; it doesn’t change what the IRS requires.
A Possible Change for Public Companies
FASB has been moving in the opposite direction from the IASB. In late 2020, the Board tentatively decided to reintroduce goodwill amortization for public companies, with a default period of 10 years on a straight-line basis and the ability to justify a different period on a deal-by-deal basis. The project has stayed on FASB’s active agenda, and as of mid-2025 no final standard had been issued. If FASB does finalize the change, public company treatment would effectively match the alternative private companies can already elect, and companies with large goodwill balances from past acquisitions would see recurring amortization charges that today’s rules don’t produce.