Treatment of Goodwill on acquisition

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Vijay (Querist)
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06 March 2008 Whats should be the treatment of Goodwill arising at the time of acquisition of a company, as per Indian Accounting Standard as well as per International Acounting Standards. For how many years goodwill should be amortised?

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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06 March 2008 As per AS 14, Goodwill arising on amalgamation represents a payment made in anticipation of future income and it is appropriate to treat it as an asset to be amortised to income on a systematic basis over its useful life. Due to the nature of goodwill, it is frequently difficult to estimate its useful life with reasonable certainty. Such estimation is, therefore, made on a prudent basis. Accordingly, it is considered appropriate to amortise goodwill over a period not exceeding five years unless a somewhat longer period can be justified.