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CA Intermediate · Advanced Accounting · AS 14 Accounting for Amalgamations

On 1 October 2025, Tapas Ltd acquired Uday Ltd in an amalgamation in the nature of purchase, and goodwill of ₹6,00,000 arose. Tapas Ltd's management estimates a useful life of five years for this goodwill and amortises it on a straight-line basis from the date of amalgamation. The financial year ends on 31 March 2026. What amount of goodwill amortisation should be charged for the year ended 31 March 2026?

The charge is ₹60,000. Goodwill of ₹6,00,000 amortised over five years gives ₹1,20,000 a year. The amalgamation took place on 1 October 2025, so only six months fall in the year ended 31 March 2026, which makes the amortisation half of the annual amount.

  1. A₹60,000Correct
  2. B₹1,20,000
  3. C₹30,000
  4. D₹6,00,000

Explanation

Annual amortisation = ₹6,00,000 ÷ 5 = ₹1,20,000. The goodwill existed for 6 months (1 Oct 2025 to 31 Mar 2026), so the charge is ₹1,20,000 × 6/12 = ₹60,000. A full-year charge of ₹1,20,000 ignores the part-year, and writing off the whole amount is not required since goodwill is amortised over its useful life.

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