Last reviewed: July 2026.
Goodwill and intangible assets are both non-physical, but they are not interchangeable. Identifiable intangible assets are recognised separately when they meet the relevant criteria. Goodwill is the residual recognised in a business combination after identifiable assets and liabilities are measured.
Goodwill is governed mainly by IFRS 3 and IAS 36, while other intangible assets are governed mainly by IAS 38.
Core differences
| Feature | Goodwill | Other intangible assets |
|---|---|---|
| Identifiability | Not separately identifiable | Separable or arises from contractual/legal rights |
| Origin | Recognised only in a business combination | Acquired separately, in a combination or internally developed if criteria are met |
| Useful life | Not amortised under full IFRS | Finite life amortised; indefinite life not amortised |
| Impairment | Annual and indicator-based CGU testing | Indicator-based, plus annual testing for indefinite-life or not-yet-available assets |
| Internally generated | Never recognised | Some development costs may qualify; brands and customer lists generally do not |
What goodwill represents
Goodwill reflects future economic benefits from assets that cannot be individually identified and separately recognised. It can include synergies, assembled workforce and strategic benefits.
Goodwill calculation
A simplified formula is:
Consideration + NCI + previously held interest − fair value of identifiable net assets
Review the goodwill accounting guide.
Identifiable intangible assets
An intangible asset is identifiable when it is separable or arises from contractual or legal rights. Examples include patents, software, customer relationships, licences and technology.
Business-combination recognition
IFRS 3 requires acquired identifiable intangibles to be recognised separately from goodwill when the criteria are met. The seller may not have recognised them previously.
Separately acquired intangibles
Separately acquired intangible assets are initially measured at cost, including directly attributable preparation costs. Subsequent measurement follows the cost or revaluation model when an active market exists.
Internally generated research
Research expenditure is expensed because the entity cannot demonstrate an asset that will generate probable future benefits at that stage.
Development expenditure
Development cost is capitalised only from the date all IAS 38 criteria are demonstrated: feasibility, intention, ability, probable benefits, resources and reliable measurement.
See the research and development costs guide.
Internally generated brands and customer lists
Internally generated brands, mastheads, publishing titles, customer lists and similar items are not recognised because expenditure cannot be distinguished reliably from developing the business as a whole.
Finite useful lives
Finite-life intangibles are amortised over the useful life using a method reflecting consumption. Residual value is usually zero unless specific conditions exist.
Indefinite useful lives
An indefinite life does not mean infinite. It means no foreseeable limit to the period of net cash inflows. The assessment is reviewed each period and the asset is tested annually for impairment.
Goodwill impairment
Goodwill is allocated to cash-generating units expected to benefit from the combination. It is tested annually and when impairment indicators exist. Goodwill impairment is not reversed.
Intangible asset impairment
Finite-life intangibles are tested when indicators exist. Indefinite-life and not-yet-available intangibles are tested annually and when indicators exist. Reversals may be permitted for non-goodwill assets when conditions improve.
Worked acquisition example
An acquirer pays 1,500,000 CU. Identifiable net assets include a customer relationship valued at 200,000 CU and other net assets of 1,100,000 CU. Goodwill is 200,000 CU.
Recognising the customer relationship separately avoids overstating goodwill.
Subsequent expenditure
Advertising, training, start-up and maintenance costs are generally expensed. Expenditure on an existing intangible is capitalised only when recognition criteria are met.
Active markets and revaluation
IAS 38 permits the revaluation model only when fair value can be measured by reference to an active market. Active markets for unique brands, customer relationships and technology are uncommon.
Acquisition-related workforce and synergies
An assembled workforce is not recognised separately because the entity usually lacks sufficient control over employees. Its value may therefore form part of goodwill together with expected synergies.
Disposal and derecognition
Derecognise an intangible asset when disposed of or when no future benefits are expected. The gain or loss compares net proceeds with carrying amount and is recognised in profit or loss.
Disclosures
Disclose classes, useful lives, methods, gross and accumulated amounts, movement reconciliations, impairment and material individual assets. Goodwill disclosures include CGU allocation and impairment assumptions.
Current IASB projects
The IASB is reviewing IAS 38 and is also working on business-combination disclosures, goodwill and impairment. As of July 2026, these projects have not replaced current IFRS 3, IAS 36 or IAS 38 requirements.
Connection to group accounts
Goodwill appears only in consolidated accounts or the accounting for a business combination, not as an internally generated asset in an individual entity.
Review the group accounts guide.
Controls over acquisition accounting
Maintain valuation reports, purchase agreements, useful-life assessments and the bridge from consideration to identifiable net assets and goodwill. Review provisional amounts before the measurement period closes.
Common mistakes
- treating every non-physical asset as goodwill;
- failing to identify acquired customer relationships or technology;
- recognising internally generated goodwill;
- capitalising research or advertising;
- amortising goodwill under full IFRS;
- failing to test indefinite-life assets annually;
- reversing goodwill impairment.
Key takeaway
Recognise identifiable intangible assets separately and use goodwill only as the acquisition residual. Useful-life, amortisation and impairment rules then differ significantly.
Official references: IFRS 3 Business Combinations, IAS 38 Intangible Assets, and IAS 36 Impairment of Assets.