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Goodwill

If a company adopts the FRSSE, does it have to amortise goodwill over a period of up to 20 yearas.

Or can it adopt the FRS approach of no amortisation and annual impairment reviews ?

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One or the other

Although the FRSSE says that when there are transactions or events not dealt with in the FRSSE, small companies should have regard to FRS & UITF Abstracts, this does not apply in the case of goodwill, on which the FRSSE is explicit.

The rule set out in the FRSSE is that goodwill should be depreciated on a straight-line basis to a residual value of nil over the useful economic life, not exceeding 20 years.  However, para.6.15 says that useful economic lives should be reviewed at the end of each reporting period and revised if necessary, but the revised life must still not exceed 20 years from the date of acquisition.

If you do not wish to meet this requirement of the FRSSE, you cannot adopt the FRSSE partially in respect of other matters and use the FRS for goodwill.  Instead, you must adopt full FRS across the board as if the company is not small.

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Where in FRS10...

... does it say that you don't (under any circumstances) amortise goodwill.

It says that where the goodwill has a limited useful life (and there's a rebuttable presumption that it's got a life of no more than 20 years), it should be amortised over the UEL.

If you opt out of the FRSSE, you'll end up having to adopt FRS102 in due course, where the presumed UEL is a much more realistic 5 years.

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FRS 10
Thanks Euan ... you have confirmed my view

George ... FRS 10 para 15 "should" does not equate to "must" and para 17 gives you the circumstances when you don't amortise

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Yes but

Should means that that is the generally accepted accounting practice.  To apply paragraph 17, you need to be able to satisfy the requirements of paragraph 19, which I find it hard to believe you ever will, in the case of goodwill.

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