Accounting treatment for Goodwill

AS 6481 views 4 replies

CA Pavithra S

Chartered Accountant

92 Points Joined April 2008

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

Replies (4)

Mani VGS

Teacher

729 Points Joined October 2008

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

422 Points Joined December 2007

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

Ravi S.

Articles

294 Points Joined January 2008

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