Goodwill—the amount recognized as goodwill may consist of one or more unidentified intangible assets and identifiable intangible assets that are not reliably measurable.  The elements of goodwill have varying useful economic lives.  Examples of elements of goodwill include new channels of distribution, synergies of combining sales forces, and a superior management team.   Because those and similar elements cannot be reliably measured separately from each other, they are accounted for collectively as goodwill.

Acquired intangibles

Recognize any intangible assets acquired from other enterprises or individuals whether those assets are acquired singly, in groups, or as part of a business combination and shall initially measure those assets based on their fair value.

Internally Developed Intangible Assets

Costs of internally developing, maintaining, or restoring intangible assets that are not specifically identifiable, have indeterminate lives, or are inherent in a continuing business and related to an enterprise as a whole are  expensed when incurred

Amortization of Intangible Assets Other Than Goodwill

Reliably measurable identifiable intangible assets other than those intangible assets that meet the criteria for nonamortization shall be amortized over their useful economic lives.  The useful economic life of an intangible asset shall be presumed to be 20 years or less.  The presumption that an intangible asset has a useful economic life not longer than 20 years may be overcome if the intangible asset generates clearly identifiable cash flows that are expected to continue for more than 20 years. . .

The amount of an identifiable intangible asset to be amortized shall be the amount assigned less any residual value (assumed to be zero with some exceptions.)

The method of amortization shall reflect the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up.  If that pattern cannot be reliably determined, a straight-line amortization method shall be used.

An intangible asset shall not be written off in the period of acquisition unless it becomes impaired due to changes in circumstances or events occurring during that period.

Nonamortization of intangibles

If an intangible asset meets the criteria for overcoming the 20-year useful life presumption, is of a type that has an observable market, and is determined to have an indefinite useful economic life that is not otherwise limited, it shall not be amortized until its life is determined to be finite.  An intangible asset that meets those criteria shall be reviewed for impairment annually.

Amortization of Goodwill

All goodwill shall be amortized over its useful economic life, but not over a period longer than 20 years.  The useful economic lives of the underlying elements of goodwill shall be considered in determining the amortization period for goodwill.  While determining the amortization period for goodwill involves judgment, the period selected shall not be unrealistically long or short.
 
 

Amortize goodwill on a straight-line basis unless another systematic method can be demonstrated to be more appropriate and the resulting amortization charge in the early years is no less than it would be under a straight-line method.  Goodwill shall not be written off in the period of acquisition unless it becomes impaired due to changes in circumstances or events occurring during that period.

Financial Statement Presentation

All goodwill shall be aggregated and presented as a separate line item in the statement of financial position.  At a minimum, all other intangible assets shall be aggregated and presented as a separate line item in the statement of financial position.  However, that requirement does not preclude presentation of individual intangible assets or classes of intangible assets as separate line items.

Goodwill amortization expense and goodwill impairment losses (collectively referred to as “goodwill charges”) shall be presented on a net-of-tax basis as a separate line item in the income statement.

 All enterprises reporting goodwill charges shall display a subtotal, after income taxes but before goodwill charges, that is descriptive of the items that follow; for example,income before goodwill charges and extraordinary item or income before goodwill charges and discontinued operations.  That subtotal shall be followed by the line item for goodwill charges that in turn shall be followed by a subtotal that is descriptive of the other items that follow; for example, income before extraordinary item or income before discontinued operations.  If there are no other items that follow, the goodwill line item shall be followed by the total net income (or a similar caption).

Goodwill charges associated with a discontinued segment shall be included (on a net-of-tax basis) within the results of discontinued operations.  If goodwill impairment losses are associated with extraordinary items or changes in accounting principle, those losses shall be included as part of those line items in the income statement as appropriate.

The amortization expense and impairment losses for intangible assets other than goodwill shall be presented in income statement line items as deemed appropriate for each enterprise.  Those charges may not be presented on a net-of-tax basis in a manner similar to the goodwill charges and they should be included in the subtotal of income that precedes the goodwill charges.
Income Tax Allocation

Goodwill charges shall be presented on a net-of-tax basis.