Goodwill

Goodwill

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I have just obtained a new client and in their latest accounts it is showing goodwill of £40k that hasn't been amortised since incorporation 10 years ago. It was the standard sole trader to Ltd company incorporation though this should surely have been amortised evenly throughout the years? How would I go about writing this down to zero. Cr £40k goodwill amortisation Dr £40k directors loan?

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By johngroganjga
01st Dec 2014 15:16

DLA?

Why on earth would you Dr DLA?

Is the goodwill of the type where amortisation would have been tax deductible?

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By Snoppy76
01st Dec 2014 15:33

You shouldn't Dr DLA, that's exactly the same reason why I shouldn't try and multitask and type a query whilst doing some other work. My error. No the amorisation wouldn't have been tax deductible. The goodwill was created after April 2002 from a sole trader to a ltd company, but I'm at a loss at to why it hasn't been amortised.

 

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By johngroganjga
01st Dec 2014 15:38

So if it's just an accounting question (i.e. with no tax effect) then just amortise it over whatever period you and the client agree is reasonable.

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By Briar
01st Dec 2014 15:50

What about Impairment?

If there has been no impairment to the value, why amortise it? If the directors are happy that the accounts give a true and fair view without amortisation, then isn't that allowed under the Companies Acts?

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By Duhamel
01st Dec 2014 16:05

What about FRS102?
I believe, for periods starting after 1 January 2015 under FRS102 you would have to amortise, most likely over 5 years. Unless you apply the Micro entity regime.

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