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Goodwill & FRS 102 Section 1A?

What is the correct accounting treatment of goodwill under FRS 102 Section 1A


I am under the impression that for example if a company started trade 1 Jan 2006, had a 31 Dec year end date, acquired goodwill of £100,000, and this was being written off over 20 years, then under old rules at 31 December 2015 £50,000 would have been amortised. Applying FRS in the transitional period I was under the impression that you looked at goodwill right from the start and applied the FRS 102 10 year amortisation rule from that date, which in my example would have resulted in the goodwill amortisation at date of transition being NIL. Is this correct? I have seen accounts prepared by others which follow this method, but others where the 10 year amortisation is being applied from date of transition, based on NBV at that point. Also, if the former is the correct treatment, and the goodwill is tax deductible, can the company claim a 'one off' amortisation deduction for the accelerated amortisation in the transitional year?

Thank you


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10th Nov 2017 12:48

The accounting answer is "either". Your basic premis is correct but there is a transitional option that allows for the residual value at the date of transition to be amortised over the remaining life. The 10 year limit is not a rule but only used "in exceptional cases". Commentators feel that there should be no need to amend the useful life if it was reliable in the first place. i.e. if it was being written off over 20 years (as many did) and the only doubt, presumably, was how much over 20 years the life might be then continue with the 20 year life.

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