Part 5- Goodwill

There are some significant differences in the way in which goodwill is accounted for under FRS 102 in comparison to Irish & UK GAAP. Under current Irish & UK GAAP, goodwill is capitalised and amortised over its useful economic life. FRS 10 contains a rebuttable assumption that the useful economic life cannot exceed 20 years. In circumstances where the goodwill can be justified and measured to be greater than 20 years this assumption can be rebutted and goodwill can be amortised over a period of greater than 20 years. This treatment has resulted in goodwill being amortised over a period of less than 20 years in the majority of instances. Under FRS 102, goodwill is still required to be amortised over its useful economic life. However, if the useful economic life cannot be reliably measured, it is capped at 10 years. This will result in instances where goodwill will be amortised over a far shorter time than in the past. The new rules will require management to assess the useful life of the company’s goodwill in more detail. If management are unable to make this assessment, then the goodwill amortisation should be capped at 10 years.

What questions do you have?

We are happy to help. Please post your comment below or contact our friendly and knowledgeable team on 01 677 9000.  To keep in touch, connect with us on Linkedin. If this article helped you, please share it with other businesses.