Recognizing deferred tax assets or liabilities in a business combination affects the amount of goodwill.

Question

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In a business combination, recognizing deferred tax assets or liabilities affects the amount of goodwill because the recognized deferred tax amounts alter the fair value of the net assets acquired, thereby changing the difference between the acquisition cost and the net identifiable assets, which is recognized as goodwill.

Recognizing Deferred Tax Assets or Liabilities in a Business Combination