Intangible aspects of goodwill

Article Abstract:

The Accounting Standards Board's recently issued Financial Reporting Exposure Draft No. 12, 'Goodwill adn Intangible Assets,' provides guidance on the accounting treatment of purchased goodwill and intangible assets in the UK. The major provisions of the proposed accounting standard include the capitalization of purchased goodwill, recognition of purchased intangible assets separately from goodwill when reliable valuation is possible, and amortization of goodwill and intangible assets over a maximum of 20 years. The new exposure draft raises several questions that require consideration. These include if and how acquired intangibles should be recognized separately from purchased goodwill, how the impairment review should be conducted, how past transactions should be treated, and if intangible assets or acquired goodwill could be expected to have such a long useful life that they need not be amortized. These issues are discussed.

Goodwill (Business)

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The death knell for historical cost?

Article Abstract:

The current value system was the focus of the Accounting Standards Board's (ASB) two recently published discussion documents. Both papers, 'Measurement in Financial Statements' and 'The Role of Valuation in Financial Reporting,' propose the increased use of current values in accounting. The second publication contends that the current system of stating assets at historical cost is highly unsatisfactory. The major flaw of the historical cost system is that it sets the values of assets at the date of acquisition so that these values lose their relevance at a later date. In view of historical costing's disadvantages, the second discussion paper proposes alternative valuation bases. 'Measurement in Financial Statements,' a chapter of the ASB's Statement of Principles, contains a comprehensive discussion of issues associated with the valuation of assets and liabilities.

Valuation, Cost accounting

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UITF Abstract 17: employee share schemes

Article Abstract:

The Accounting Standard Board's UITF Abstract No 17 'Employee Share Schemes' addresses the measurement and timing of the charge that companies should recognize in their profit and loss account. It covers all employee share schemes, including share option schemes which are used increasingly as an alternative or a supplement to share option plans. One of the recommendations included in the document is that the recognition of the cost of employee awards in the form of shares or rights to share should be made over the period related to the employee's performance. It also recommends that the recognizable amount should be based on the fair value of the shares at the date when the award was given. The Abstract's prescribed accounting treatment should be applied in financial statements related to accounting periods ending on or after Jun 22, 1997.

Employee ownership, Employee stock options

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