QUESTION
How should goodwill be accounted for after initial recognition? Can it simply be amortised over its useful life?


ANSWER
Goodwill must be amortised over its useful life, with a presumption that the useful life will not exceed 10 years. No indefinite life goodwill is allowed. Sections 18 and 19 provide the following guidance: 19.23 gAfter initial recognition, the acquirer shall measure goodwill acquired in a business combination at cost less accumulated amortisation and accumulated impairment losses: (a) An entity shall follow the principles in paragraphs 18.1918.24 for amortisation of goodwill. If an entity is unable to make a reliable estimate of the useful life of goodwill, the life shall be presumed to be ten years. (b) An entity shall follow Section 27 Impairment of Assets for recognising and measuring the impairment of goodwill.h 18.19 gFor the purpose of this IFRS, all intangible assets shall be considered to have a finite useful lifech 18.20 gIf an entity is unable to make a reliable estimate of the useful life of an intangible asset, the life shall be presumed to be ten years.h Goodwill does not need to be tested for impairment annually, but an impairment test is required if there is an indicator that goodwill may be impaired.