OK guys - re ammortisation of goodwill. I can understand why you...

OK guys - re ammortisation of goodwill. I can understand why you guys are confused so i will try and simplify it for you. The Australian Accounting Standards (AASB138) which is on Intangible Assets, which Goodwill is, is rather complex in it's application as you would expect. All Australian companies must prepare their accounts in accordance with the standards. A pertinent extract is as follows.

"The amortisation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity"

That is, as the revenue starts to flow for the assets purchased, like M2, then you start to reduce the value of goodwill. Likewise, if the revenues are not as per expected, then you will also reduce the value of goodwill, commonly called impairment.

It is rare to hold a value for goodwill for very long. Depending on what's bought, 5 years would ordinarily be tops. Re technology, I would have thought 3-5 years due to the ever changing nature of technology.

I am a CPA and have over 30 years experience with this stuff.