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CA Intermediate · Advanced Accounting · AS 14 Accounting for Amalgamations

Under AS 14, which treatment applies to goodwill arising on an amalgamation in the nature of purchase?

Goodwill from a purchase-type amalgamation is amortised to income systematically over its useful life, presumed to be five years unless a longer period is justified. It is not written off immediately to reserves or left unamortised.

  1. AIt is amortised to income systematically over its useful life, normally not exceeding five years unless a longer period is justifiedCorrect
  2. BIt is written off immediately to reserves
  3. CIt is carried at cost and never amortised
  4. DIt is adjusted against Securities Premium only

Explanation

AS 14 requires goodwill arising on amalgamation to be amortised to income on a systematic basis over its useful life. Presumed life is five years unless a somewhat longer period can be justified.

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