The significance of making a Reg. 5907(2.1) election has increased with the assimilation of goodwill to depreciable property

Reg. 5907(2.1) allows a taxpayer to elect to use accounting rather than tax depreciation for its depreciable or foreign resource properties in computing a foreign affiliate's earnings from an active business. With the proposed assimilation of goodwill and other eligible capital property to the world of depreciable property, the potential benefit (or detriment) from making this non-revocable election has increased.

Because goodwill is amortized for US tax purposes on a straightline basis over 15 years but is generally carried at historical cost for the purposes of financial statements, the benefit of following accounting rules rather than tax rules may be significant if there has been no impairment. At the same time, the opposite could be true if a significant impairment was recognized for accounting purposes in a subsequent year before the purchased goodwill was the subject of an equivalent amount of amortization for tax purposes.

Neal Armstrong. Summary of Albert Baker and David Bunn, "FAs and the Repeal of the ECP Regime", Canadian Tax Highlights, Vol. 24, No. 9, September 2016, p. 4 under Reg. 5907(2.1).