Goodwill Case

Three countries have the same recognition on goodwill. Goodwill is only recognised as assets on balance sheet if it is acquired in business combinations. Recognising goodwill generated within the enterprises as an asset is prohibited.

In acquisition method, acquirers shall record goodwill on the date of acquisition. According to US GAAP and FRS10, the initial value of goodwill is an excessive amount of the acquisition cost over the fair value of acquired net assets. By contrast, in Vietnam, initial measurement is the difference of the cost of business combinations over the acquirer’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities (VAS 11). As a result of different initial measurement methods, in the case of not taking into account the potential liabilities of goodwill on the date of combination is lower than in the case of the recognition of the contingent liabilities.

Though VAS are revised from IAS and IFRS to be suitable for Vietnam situation as a result of harmonization, there is still lack of accounting treatments of subsequent measurement on goodwill in Vietnam and it is amortized only for tax purpose. In contrast, subsequent measurement in US and UK are standardized in FRS and US GAAP. In the US, the amortization of goodwill is disallowed and the impairment of goodwill is tested at least annually if there is an indicator that the implied fair value of goodwill is smaller than its carrying amount. Goodwill is allocated to the reporting unit which is considered as an operating segment or one level below the operating segment and its impairment test is a two-step approach. The subsequent reversals of recognized impairment losses are prohibited after the impairment test is completed. However, amortization of goodwill is allowed in the accordance with FRS 10 and11. Straight line method should be used to amortize goodwill if there is no method more suitable and its useful life should