Goodwill was introduced on the Balance Sheet when a sole-trader went Limited. Should this be amortised? And if so, over what period?
Tricia Callow
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IAS 38
In the case in question, the goodwill would be covered by IFRS 3 as the company is acquiring the sole trader's business ("A business combination is the bringing together of separate entities or businesses into one reporting entity")
IAS 38 is concerned with other intangibles acquired in such a transaction - customer lists for example - which would indeed be amortised.
Therefore, goodwill really isn't amortised.
Goodwill amortisation - yes or no?
Re. James reply - Even if still using FRSSE, it's prudent to keep an eye on the International Standards, as that's the way UK GAAP is going - isn't it?
And I'm puzzled by your answer saying no amortisation of goodwill ... further research has revealed that IAS 38 (which applies to purchased goodwill other than acquisitions) says that if it has a finite life, it should be amortised over its useful life.
Is it relevant?
The treatment would be the same - ie no amortisation. However, is your client really proposing to adopt IFRS as opposed to sticking with UK GAAP? Seems a strange choice for an incorporated sole trader!