Goodwill
Goodwill in a business combination is the excess of acquisition consideration plus non-controlling interest, and any previously held interest where relevant, over the acquisition-date fair value of identifiable net assets. It represents benefits not separately recognised as identifiable assets. FA commonly uses simplified goodwill workings. Purchased goodwill is recognised in group accounts, is not amortised under IFRS and is subject to impairment review.
Worked example
Consideration of $90,000 plus non-controlling interest of $25,000 less identifiable net assets of $100,000 gives goodwill of $15,000.
Common mistake
Do not include post-acquisition profits in acquisition net assets or recognise internally generated reputation as an asset called goodwill.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | K1 | Direct | July 2027–August 2028 |
| ACCA | SBR | Direct | Official assessment-window verification pending |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |