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Discussion > Accounts > AS >

Accounting treatment for Goodwill

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Chartered Accountant

[ Scorecard : 92]
Posted On 26 November 2008 at 12:51 Report Abuse

 

Hello sir/madam,
 
I have one question relating to Goodwill or Intellectual property rights?
This is an practical one, one of the company  has purchased the proprietory concern (sale to a co). In this case company paid Rs 70 lacs as goodwill (as per agreement of sale deed). while finalizing the accounts of the co how this goodwill be recognized. Proprietory concern is an Hospital. can we treat this goodwill paid in cash as intellectual property? can we capitalize this? can we claim depreciation on this as intangible asset? 
Please suggest me. I am final CA Student.
I want to know the accounting treatment in the books of company regarding this.
 
Advance thanks.
 
Waiting for reply

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Mani VGS
Teacher

[ Scorecard : 694]
Posted On 26 November 2008 at 13:14

Dear Pavithra Madam,

One small correction please. For Intangible asset, we will not tell it as depreciation. We should call it as amortisation.

With respect to goodwill, since it is not a self-generated one, it can be incorporated in our books of accounts as per AS-26. Any intangible asset should be intially recorded in the books of account at cost.

But before recognising the Goodwill, ensure whether the recognition criteria is satisfied under AS 26.

Conditions:

1. Whether future economic benefits flow to enterprise?

2. Is it possible to estimate the cost reliably?

If you get answer for these questions, i hope you can very well incorporate in the books of accounts.

Members, kindly rectify me if i am wrong.





CA Akshat
article

[ Scorecard : 417]
Posted On 26 November 2008 at 13:46

in my humble openion this should be considered as purchased gudwill and amirtise till 5 years




Ravi S.
Articles

[ Scorecard : 294]
Posted On 26 November 2008 at 13:49

Purchased goodwill can be capitalised but the future inflow of economic Benefits which should be reliably measured and then only capitalised if there is a deviation between them capitalise at cost and impaire the goodwill




Prakash Popat

[ Scorecard : 3129]
Posted On 17 January 2009 at 12:18

No question of Goodwill to be amortized,If firm earning capacity increased in subsequent years Goodwill Get increased.



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