ACCOUNTING AND AUDITING ASPECTS OF ASSESSING GOODWILL AS A SPECIFIC INTANGIBLE ASSETS OF GROUPS OF COMPANIES

Abstract

The article is devoted to topical issues of analysing the advantages and disadvantages of goodwill measurement methods for the purposes of preparing consolidated financial statements. It is argued that the recognition of goodwill with impairment, as provided for in the current IFRS 3, has disadvantages related to the high level of subjective estimates, the advantage of the costs of testing over the amount of benefits from using the relevant information, and the high level of risk when conducting an audit. It is proposed that, within the framework of the IFRS improvement project, which is being implemented on an ongoing basis by the IASB, a mixed approach be introduced that would allow companies to apply one of two alternative valuation methods (models): with the amortisation of goodwill and additional recognition of impairment losses in the event of signs of impairment, or exclusively with the recognition of goodwill impairment losses without amortisation and mandatory annual impairment testing. The application of the first method involves a return to the systematic write-off of goodwill by accruing amortisation over a specified period. The useful life may be determined as one of the types of applicable accounting estimates, taking into account the type, characteristics of the business and management's intentions regarding ownership at the time of acquisition of the company; as well as conducting impairment testing as a mandatory procedure in the event of internal or external signs of impairment, as is done for property, plant and equipment and other non-current assets. The application of the second method involves the current methodology with mandatory impairment testing of goodwill at each reporting date without amortisation. Giving groups of companies the right to choose the method of goodwill measurement at the balance sheet date can significantly facilitate the process of goodwill measurement at the date of consolidated financial statements, reduce risks during the audit, and increase the clarity, accuracy and predictability of reporting indicators for users.