Goodwill

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Aroop Datta (Querist)
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23 April 2011 Hello, I had a query on Goodwill -

In case of a taken over company with Goodwill is it a must that we make an Amortization (AS26) or is it enough if we do an impairment testing (AS28).

Kindly help to clarify.

Thanks a lot in advance.

Mandar

Mandar (Expert)
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25 April 2011 Hi Aroop

One has to apply AS 26 as well as AS 28 independently.

As 26 : Amortization : It is the process of allocating an amount of expense over the period of beneficial life. So you can amortize the cost over the life of asset.

Now after amortization you have to test the asset for impairment. As 28 is applicable for the same. The asset needs to be impaired if recoverable amount is less than the carrying amount. If the asset is impaired then only follow AS 28 otherwise amortize the cost through AS 26.

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