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Goodwill Treatment

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CA Pavithra S

Chartered Accountant

52 Points Posted on 28 July 2009

Hi,

Please advise,

A private company acquired a sole proprietor concern and paid Rs. 3 crores also as goodwill (Paid in Cash) to the sole proprietor. What is the accounting treatment for this. Should we apply AS 14 as purchased goodwill and amortise it over a period of 5 years or AS 26 is applicable? Can we consider it as intangible asset and provide 25% depreciation on it. (Concern acquired was hospital) can we treat such goodwill as intellectual property rights?

Awaiting reply,

Replies (1)

Naresh Kedia

Chartered accountant

28 Points Posted on 29 July 2009

Hi Pavithra,

According to AS 14 , whatever amount paid for goodwill has to be debited to goodwill account and It should be amortised for the period of three to five year but According to IFRS 3 Business combination, it should be debited to goodwill account and Impaired it whenever necessary but amortisation of goodwill will not be allowed.

It will not be consider as intengible assets and not charged deprication @ 25%.

As per my view , AS 14 will be applicable and AS 26 will not applicable.