short cs professional notes Goodwill on Amalgamation
cs professional corporate restructuring concept notes
Goodwill arising on amalgamation represents a payment made in anticipation of future income and it is appropriate to treat it as an asset to be amortised to income on a systematic basis over its useful life. Due to nature of goodwill, it is difficult to estimate its useful life, but estimation is done on a prudent basis. Accordingly, it should be appropriate to amortise goodwill over a period not exceeding five years unless a somewhat longer period can be justified.
The following factors are to be taken into account in estimating the useful life of goodwill:
(i) the forceable life of the business or industry;
(ii) the effects of product obsolescence, changes in demand and other economic factors;
(iii) the service life expectancies of key individuals or groups of employees;
(iv) expected actions by competitors or potential competitors; and
(v) legal, regulatory or contractual provisions affecting the useful life.