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CA Intermediate · Advanced Accounting · AS 14 Accounting for Amalgamations

Trident Foods Ltd (year-end 31 March) acquired Annapurna Mills Ltd in an amalgamation in the nature of purchase with effect from 1 July 2025. Goodwill of ₹6,00,000 arose. The management estimates a useful life of five years and has no justification for a longer period. What amount of goodwill amortisation should be charged for the year ended 31 March 2026, assuming straight-line amortisation?

The charge is ₹90,000. Goodwill from an amalgamation in the nature of purchase is amortised over its useful life, presumed not to exceed five years. The annual charge is ₹1,20,000, and only nine months fall in the year from 1 July 2025 to 31 March 2026, so nine-twelfths applies.

  1. A₹1,20,000
  2. B₹60,000
  3. C₹1,50,000
  4. D₹90,000Correct

Explanation

Annual amortisation over five years = 6,00,000 ÷ 5 = ₹1,20,000. Goodwill exists from 1 July 2025 to 31 March 2026, which is 9 months, so the charge is 1,20,000 × 9/12 = ₹90,000. The figure ₹1,20,000 ignores the part-year effect.

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