A business has purchased another company (both are limited companies). It paid £550,000 for the new subsidiary, with net asset value of £475,000 so goodwill of £75,000. They propose to write the goodwill off over 3 years straight line. In the group accounts, is the £25K write down shown as amortisation of goodwill, or is it a provision for impairment?
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Amortisation is a systematic annual adjustment.
Impairment is a one off adjustment after an impairment review has been carried out.