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Thread: Goodwill amortisation

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    Goodwill amortisation

    Good afternoon guys,

    I have barely had any exposure to Goodwill in the past, but recently attended an IFRS for SME's update, which got me thinking.

    I have a client who started a Close Corporation in 2009. The last financials done was in 2012. As GAAP was done away with in December 2012, the client will have to comply with IFRS for SME's from 2013.

    They did not provide amortisation in the past, but according to the guidelines:
    "If an entity is unable to make a reliable estimate of the useful life of an intangible asset, the life shall be presumed to be ten years."

    Therefore, as far as I understand, a note has to be included in the financials, specifying that this is the first year the IFRS for SME's has been applied, and then there should be a "transitional" note, explaining that goodwill is now already depreciated for 4 years (2010,2011,2012+2013), and the carrying amount will therefore be 60% of the cost.

    Does this make sense to anyone, or do you haven any feedback in this regard?

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    That's about right.

    So for 2013 you will charge the amortization for 4 years against income.

    It is also a change in accounting policy and the impact of changes should be disclosed. You can be elegant about it and combine the whole issue if you like, because the policy change is as a result of adopting IFRS.

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    Clive,

    Shouldn't 2010 and 2011 be deducted against retained income?

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    You can yes. If you do you should produce a Changes In Equity Statement and show the prior years as a 'Change In Accounting Policy To Comply With IFRS' against retained income. Then you would only reflect the current year in the income statement.

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    I think I will be going down that road, or else it will appear as if they all of a sudden made a great loss in the current year, and I think it will make comparability easier.

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