Goodwill

Gill Gittings

I have a client who has about £40k of goodwill and he wants to revalue this. It was brought on to his balance sheet a number of years ago when he incorporated. Does anyone know if this can be done and if so how?

Thanks in advance.

Gill Gittings

Anyone?

Just even a pointer will do.

Thanks in advance

Gill x

Gem7321

Steve is probably the man to ask, but I would say all assets need to be shown at their true and fair value so if there is reason to believe goodwill is not shown at its true and fair value then a valuation/impairment review should be carried out and must be disclosed in the accounts. I'm sorry I have no idea of the best way to go about it.

Steve Collings

Hi,

You cannot revalue goodwill as you can with, say, a building under FRS 15/IAS 16 (FRS 10 / IFRS 3 deal specifically with goodwill - whilst FRS 10 / IAS 38 deal with other intangibles). Only in extremely rare circumstances will readily ascertainable market values ever be available for intangible assets - particularly goodwill. In your particular situation, where goodwill has been an 'incorporation' exercise, as was particuarly common a few years ago, your client's goodwill will not have a readily ascertainable market value.

This question is asked quite a lot because accounting for intangible assets (particularly with goodwill) is confusing, I therefore took the opportunity to clarify the issue.

Hope that helps.

Regards
Steve

Steve Collings

Just to clarify, that testing goodwill for impairment is not a 'revaluation' exercise and you would be expected to test goodwill for impairment under FRS 11 /IAS 36 and write the goodwill down to recoverable amount if there is evidence of impairment. This is particularly the case if goodwill has an indefinite life or a useful economic life of more than 20 years!

Note: IFRS strictly PROHIBITS goodwill amortisation and in every case you would be expected to test for impairment (contrast this with IFRS for SMEs which will allow entities to amortise goodwill if UEL is 10 years or less!)

Regards
Steve

Gill Gittings

@Gem7321 thanks for your help.

@steve you are amazing. Thanks for clarifying that.

Gill x