ACCA Applied Knowledge · Financial Accounting · Subsidiaries
Which one of the following statements about goodwill arising on consolidation of a subsidiary under IFRS is correct?
Goodwill arising on acquisition is not amortised under IFRS but is tested for impairment at least annually. Any impairment loss is recognised in profit or loss. It is not written off to reserves, amortised over a set life, or revalued upward.
- AGoodwill is amortised over a maximum of 20 years
- BGoodwill is tested for impairment annually and not amortisedCorrect
- CGoodwill is written off to retained earnings on acquisition
- DGoodwill is revalued each year to fair value
Explanation
Under IFRS 3 and IAS 36, goodwill is not amortised but is reviewed for impairment at least annually. Amortisation and immediate write-off are not permitted, and upward revaluation of goodwill is not allowed.
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