IFRS means International Financial Reporting Standard. This standard deals with accounting for business combinations specially for treatment of goodwill and other intangible except goodwill. This standard deals with the brand value issues in business combinations except joint ventures. According to IFRS the goodwill is an assets acquired after acquisition. Its initial value is equal to the following :
Goodwill = Net Fair value of the Acquire (F – N) – Cost of Net Assets taken over by the acquire.
International Financial Reporting Standard (IFRS) – prohibits amortization of goodwill Instead of its amortization goodwill is tested for impairement i.e. For diminish in value every year and accounting is done according to IAS – 36. AS per IAS – 36, goodwill is recorded at cost less impairment charges (Loss in its value). International Accounting Standard -38 deals with the accounting issues of intangible which are not dealt with as goodwill. This standard states that an enterprises must report or disclose in the acquired intangibles separately in Balance Sheet. All identifiable intangible assets (other than goodwill) are to be recorded at Fair value. Only those intangibles are to be recorded which are separately identifiable and are controlled by an enterpris. Moreover, the future cash inflow accruing from the intangibles are also to be determined. Such intangible include, Trade Mark, Internet domain name, Brand Royalty, Franchise, Patented Technology, Software etc.
IAS – 36 deals with the goodwill and other intangible assets like brand. The impairement in intangible assets has to be least once in a year. It involves the following two steps –
1. Compare fair value of the Asset with its book value
When FV > BV, no impairement is done
When FV < BV, impairement of intangible assets has to be done 2. Compare implied fair value with book value and note the difference. If the difference is a loss, allocate the same to the unit of intangible asset.