Goodwill-intra company adjustments-group accounts, Financial Accounting


Previously under IAS 22 on Business combinations, goodwill on consolidation used to be amortized over an estimated period of years. However, IFRS 3 (still on business combinations) prohibits the amortization Goodwill  and instead requires;

a) Positive goodwill to be carried in the accounts at cost and incase the management feels there’s been a loss of value (impairment), then it should be charged as an expense.

For the consolidated balance sheet, the relevant entry is:
      DR.  Group retained profits
            CR.  Cost of control (with the impairment)

b) Negative goodwill should be reported as income immediately.

Relevant entries are;;
DR.  Cost of control
       CR. Group profit and loss/retained profits (with the full negative goodwill)

Posted Date: 12/12/2012 2:47:55 AM | Location : United States

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