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ACCA Applied Knowledge · Financial Accounting · Intangible non-current assets and amortisation

Which of the following statements about purchased goodwill in the consolidated financial statements of a parent company, under IFRS, is correct?

Purchased goodwill is not amortised under IFRS. It is carried at cost and tested for impairment at least once a year, with any impairment loss recognised in profit or loss. Amortisation over a fixed maximum period is not permitted.

  1. AIt is amortised over a maximum of 20 years
  2. BIt is tested for impairment annually and is not amortisedCorrect
  3. CIt is written off to retained earnings on acquisition
  4. DIt is revalued each year to fair value through other comprehensive income

Explanation

Under IFRS 3 and IAS 36, purchased goodwill has an indefinite life for accounting purposes and is not amortised. Instead it is reviewed for impairment at least annually. Amortising over 20 years was the former treatment and is no longer permitted.

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