09 January 2011
Accounting rules at one time assumed that the value of intangibles depreciate over time, in the same way that tangible assets get worn out. Nowadays, in recognition that many types of goodwill don't wear out, companies no longer automatically take charges against goodwill each reporting period. Instead, they must re-examine the value of goodwill each year. If the goodwill is worth as much as what it was originally paid for, the value is left alone. On the other hand, if an acquisition eventually turns out to be worth less than what management originally paid for it, the company will then reduce its value or write-off its value entirely.
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