Answer to Question #197251 in Accounting for Prince

Question

Ifrs 3 is mandatory for all new acquisitions from march 2004. Entities have to cease the amortization of goodwill arising from the acquisitions . How is the balance of goodwill arising from those acquisitions treated

Answer 1

Solution:

Goodwill under IFRS 3 is measured as the difference between the aggregate value of the consideration transferred plus any amount of non-controlling interest plus the fair value of the previous equity interests less net identifiable assets acquired.

On the acquisition date, goodwill balance arising from the business combination should be recognized in the consolidated balance sheet of the acquirer as an intangible asset.

Under IFRS 3, goodwill is capitalized on the acquisition date in the acquirer balance sheet. It is subjected to an impairment test carried out by the acquirer at least once per year under an impairment-only approach. The acquirer must assess goodwill together with other related expenses for impairment testing purposes since goodwill does not itself generate cashflows.