short cs professional notes Goodwill on Amalgamation

Posted on 13-05-2016        By ADMIN

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. 

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