Definition for : Goodwill amortisation
Goodwill is assessed each year to verify whether its Value is at least equal to its net Book value as shown on the group's Balance sheet. This assessment is carried out by means of impairment tests. If the Market value of goodwill is below its Book value, goodwill is written down (see write-down) to its fair Market value and a corresponding impairment loss is recorded on the Income statement. More than impoverishing a company, goodwill Amortisation is linked to the profits paid at the moment of acquisition, so that the company does not forget that a part of those profits was already paid or. If there is negative goodwill (badwill), under IAS rules it should be booked as Deferred income over a maximum of 20 years, or allocated to various non-monetary Assets subject to Depreciation and amortisation that are acquired in proportion to its fair Value. Also called Purchase method.
(See Chapter 6 Getting to grips with consolidated accounts of the Vernimmen)
To know more about it, look at what we have already written on this subject