Regnskabsmæssig behandling af goodwill efter ÅRL og IFRS

Julie Gravlund Rasmussen & Mike Lolk

Student thesis: Diploma thesis


This thesis is written as the final part of the CBS Graduate Diploma in Business Administration in Financial and Management Accounting, HD(R). The thesis addresses goodwill and its treatment according to the International Financial Reporting Standards (IFRS) and the National Danish Law (ÅRL). The objective is to identify, analyze and discuss the differences between the two accounting standards, and whether it is most advantageous for the company to use the one over the other, and if so, then when and why? To provide the answer of the main question, a number of part questions will be answered. Goodwill is an intangible asset, which arises in relation to a business combination, when a company acquires an existing business ore activity. The goodwill amounts to the excess of the purchase consideration, which conducts the money paid to purchase the asset or business, over the total value of the assets and liabilities. If the purchase price is higher, it is called goodwill, and if the purchase price is lower, it is called badwill. Goodwill is placed as an intangible asset in the balance sheet in the financial statement. As the objective is to identify the differences between IFRS and ÅRL in accordance to goodwill, the two standards of accounting is compared, not only in theory but on concrete business cases as well. The thesis takes a theoretical approach, in which practical business cases are tested. In light of this, the following is relevant; Several important differences between using the National Danish Law (ÅRL) and the International Financial Reporting Standards (IFRS) are treated, but the main difference must be, that in accordance to the ÅRL the companies are forced to systematically amortize the goodwill to a definite period, and if the period cannot be set reliably, it will according to the law be 10 years. Furthermore, if there are indications of impairment, an impairment test is required. By the International Standards, goodwill does not have a specific using period, why it does not have to be amortized. Instead, the standard requires a yearly impairment test. Seen in an isolated perspective, it can be a huge advantage for some companies to use this option in IFRS instead of ÅRL. In contrast, the amortization according to the ÅRL, can also be seen as an advantage because of the regularly adjustments due to the amortizations. This means, that the company does not run the risk of a maintaining bloated goodwill in the balance sheet. Furthermore the company knows the exact minimum affect on the income statement in the future by using the National Danish Law. On the other hand, the required amortization can seem harsh, and make the company feel the remaining goodwill and amortization is nonrealistic. In theory, the goodwill in a company, can exists forever due to the impairment test in the International Financial Reporting Standards while the same company using the ÅRL, has to amortize the acquired goodwill over the expected using period. Common to both accounting standards are the risk and uncertainty due to the subsequent measurement and value adjustment, which are highly influenced by the company management. Opportunities to affect the subsequent measurement and the financial statement are present in both standards. The thesis concludes without doubts, that it is clearly far easier to set a fair and more correct value of the goodwill by using the International Financial Reporting Standards, provided by the yearly impairment tests. On the other hand, the companies using the IFRS, also runs a significant risk, especially in periods with financial crisis where budgets and future expectations hits hard on the impairment tests, and therefore impairments. The more “negative” approach to the goodwill, accordance to the ÅRL and its amortizations, prevents risks like this.

EducationsGraduate Diploma in Accounting and Financial Management, (Diploma Programme) Final Thesis
Publication date2016
Number of pages74