Goodwill

Code: 1234
👁 Views: 112

Account Information

Financial Statement Statement of Financial Position
Normal Balance Debit

Definition

Goodwill arising from acquisition of other companies

Common Journal Entries

Recorded goodwill on acquisition

Dr. Goodwill
Cr. Bank Account

Impairment test on goodwill

Dr. Impairment Loss
Cr. Goodwill

Full write-off of goodwill

Dr. Write-off Expense
Cr. Goodwill

Recorded negative goodwill

Dr. Net Assets Acquired
Cr. Negative Goodwill Income

📐 IFRS vs US GAAP Accounting Treatment

IFRS IFRS 3 Business Combinations
US GAAP ASC 350 Intangibles - Goodwill and Other
⚠️ Key Difference Between IFRS and US GAAP

IFRS never amortises goodwill; GAAP allows amortisation for private companies

❓ Frequently Asked Questions

Q: When does goodwill arise?

A: It arises only upon acquisition of another company (business combination) and represents the excess of purchase price over the fair value of identifiable net assets.

Q: Is goodwill amortized?

A: Under IFRS, goodwill is not amortized but tested for impairment annually. Under GAAP, non-public companies may elect to amortize it over 10 years.

Q: How is goodwill impairment tested?

A: By comparing the carrying amount of the Cash Generating Unit (CGU) to which the goodwill belongs with its recoverable amount (higher of fair value less costs to sell and value in use).