With a reduction in the presumed life of goodwill from 20 to five years under the new reporting standard FRS 102, many accountants are concerned about how goodwill is to be written off. This short overview from Steve Collings clarifies some of the some ambiguities.
There are some notable differences between the way in which goodwill (and other intangible assets) are accounted for in FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’, which comes into effect for accounting periods commencing on or after 1 January 2015, and that of existing UK GAAP.
Many clients will have goodwill on their balance sheet that has been accounted for under the provisions in FRS 10 ‘Goodwill and intangible assets’ and this short article aims to clear up some of the most commonly asked questions where accounting treatments are markedly different in FRS 102 with an emphasis placed on the value, and amortisation period, to be used on transition to FRS 102.
Please note that this article does not consider any tax reliefs associated with goodwill amortisation. HMRC have issued an Overview Paper for FRS 102 which may be a useful guide for those wanting an idea of the tax impact of FRS 102.
FRS 10 treatment
FRS 10 at paragraph 19 includes a rebuttable presumption that the useful life of purchased goodwill may be assessed to be more than 20 years (or indefinite) only if...
About Steven Collings
Steve Collings, FMAAT FCCA is the audit and technical partner at Leavitt Walmsley Associates Ltd where Steve trained and qualified.