question for steve

System

dear peugot

can u help me with a question i have been lookin at.it is about a consolidation balance sheet and goodwill.what rate would you write goodwill off?

many tthanks.

Dipak.

System

Re:question for steve

Dipak,

Under the International Accounting Standards regime, goodwill is not amortised or written off on an annual/periodic basis. Instead, goodwill is tested for impairment on an annual basis. Questions in which goodwill arises will never give you a amortisation policy because it is not written off using this method.

As a point of reference, UK GAAP does still amortise goodwill if it has a useful life of 20 years or less - this, however, is not applicable to your exam studies as you are not doing DFS under UK GAAP, so you can forget everything about goodwill amortisation.

The two standards that you need to look at are: IAS 36 - Impairment of Assets and IAS 38 - Intangible Assets. IAS 38 does have a lot of detail about goodwill recognition and states explicitly that internally generated goodwill is not recognised in the financial statements at all.

I am in the process of writing a summary of all the IAS's which I will publish on the accountancy students website (www.accountancystudents.co.uk) later this week.

Kind regards
Steve

Edit:

I have also PM'd you a copy of this reply as I see from the parallel forum that you have asked why the question has disappeared. It hasn't been removed it is down to the incompetence of the IT administrators of this website.