How Do You Amortize Goodwill?


How do you amortize the Goodwill of a company that is 80% equity weighted, and has a 7% growth/year?

In the U.S., goodwill is no longer amortized under GAAP. It is subject to an annual impairment test. Goodwill amortization may be deductible for taxes depending on how it was created.

If you show Goodwill on your B/S, do you amortize annually?

at what rate do you amortized the Goodwill?

If you are in the US, goodwill is not amortized. It's periodically evaluated for impairment.

Amortize Goodwill or not?

I am taking accounting and I was wondering does goodwill depreciate?

Goodwill is the subject of IFRS 3.

Recognition and measurement of goodwill.
Goodwill is recognised by the acquirer as an asset from the acquisition date and is initially measured as the excess of the cost of the business combination over the acquirer's share of the net fair values of the acquiree's identifiable assets, liabilities and contingent liabilities. [IFRS 3.51]

No amortisation of goodwill.
After initial recognition, the acquirer shall measure goodwill acquired in a business combination at cost less any accumulated impairment losses.
Goodwill acquired in a business combination shall not be amortised. Instead, the acquirer shall test it for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, in accordance with IAS 36 Impairment of Assets. [IFRS 3.55]

Negative goodwill.
If the acquirer's interest in the net fair value of the acquired identifiable net assets exceeds the cost of the business combination, that excess (sometimes referred to as negative goodwill) must be recognised immediately in the income statement as a gain. Before concluding that "negative goodwill" has arisen, however, IFRS 3 requires that the acquirer reassess the identification and measurement of the acquiree's identifiable assets, liabilities, and contingent liabilities and the measurement of the cost of the combination. [IFRS 3.56]

For disclosure requirements regarding pls refer to IFRS 3.

What is the depreciation schedule of a franchise and goodwill?

I'm buying a business and need to allocate the purchase price. The only assets are the franchise and goodwill. I want to allocate them so I can depreciate them as quickly as possible.

Goodwill and franchise or going concern are section 197 intangible assets and should be amortized over 180 months. To amortize means to deduct the applicable part of the assets adjusted basis over 15 years. No depreciation deduction is allowed and a shorter recovery period is not allowed on section 197 intangibles.

My source is Publication 535, chapter 8, page 27. I hope that helps. If I were you, I would seek a professionals help with this complicated subject.

In accounting, what incentives do managers have to overstate goodwill?

I know that goodwill does not get amortized so money stays on the books longer. Also, I know that managers can use goodwill to understate their assets, thus getting a higher net income when the assets are sold. Any other benefits that you can think of?

Goodwill is not amortised but tested for impairment. If goodwill should be impaired but the manager chose not to, then the goodwill and profit are overstated. If you're selling the company, the buyer will perform his own due diligence and it's not relevant how much goodwill is stated in the books. In any case, not all goodwill gets transferred to the buyer.



More Questions