FRS 10 has been superseded by FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland for accounting periods beginning on or after 1 January 2015. For more information visit:

• icaew.com/newukgaap

Synopsis

The general principle of FRS 10 regarding goodwill arising on acquisition (purchased goodwill) is that it is neither an asset like other assets nor an immediate loss in value. Other intangible assets may be recognised as assets when access to the economic benefits that they represent are controlled by the reporting entity.

The rules regarding capitalisation are: 

• Purchased goodwill should be capitalised
• Purchased intangible assets should be capitalised
• Internally generated goodwill should not be capitalised
• Internally generated intangible assets should only be capitalised where they have a readily ascertainable market value.

Purchased goodwill and intangible assets should be amortised over their useful economic life. There is a rebuttable presumption that this will not exceed 20 years but in some instances the useful economic life may be viewed as longer than 20 years or indeed indefinite (therefore no amortisation).

Purchased goodwill and intangibles should be subject to impairment reviews:    

• If useful economic life is less than 20 years impairment review at end of first financial year after purchase 
• If useful economic life is greater than 20 years impairment review every year.

Negative goodwill should be recognised and shown on the balance sheet directly below the goodwill heading.  

• Read FRC Summary on FRS 10

Last updated 21 June 2015