Saturday, April 24, 2010

(161)-GOODWILL AND INTANGIBLE ASSETS

Goodwill and Intangible Assets
  • Goodwill must be amortized if it is expected to last less than 20 years.
  • Otherwise, goodwill is to remain in the balance sheet.
  • Navigate goodwill is shown as a credit in the balance sheet just below positive goodwill.


If goodwill is amortized the consolidation adjustment required each year is as follows.
Debit – Consolidated profit and loss account
Credit – Provision for amortization of goodwill


The unamortized portion will be including in the consolidated balance sheet under fixed assets.
Financial reporting standards contain a presumption that the useful life of the goodwill is less than 20 years. The presumption may be rebutted. If it is greater than 20 years, it must still be amortized. If it is indefinite, it should not be amortized, but a full impairment review should be performed each year. An impairment review should, in any case, be performed at the end of the first full year after acquisition.

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