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Goodwill

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Querist : Anonymous

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Querist : Anonymous (Querist)
04 July 2012 Why we write off goodwill.Is there any logic?Please reply with exact answer with reference if any.
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Sanjay Chauhan (IFRS)

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Sanjay Chauhan (IFRS) (Expert)
06 July 2012 It is a requirement of Indian GAAP under AS 14.

Excerpt as follows:
19. Goodwill arising on amalgamation represents a payment made in anticipation of future income and it is appropriate to treat it as an asset to be amortised to income on a systematic basis over its useful life. Due to the nature of goodwill, it is frequently difficult to estimate its useful life with reasonable certainty. Such estimation is, therefore, made on a prudent basis.

Accordingly, it is considered appropriate to amortise goodwill over a period not exceeding five years unless a somewhat longer period can be justified.
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