Goodwill: Analyse mellem årsregnskabsloven og IFRS

Mads Serup Larsen & Daniel Formby

Student thesis: Diploma thesis

Abstract

The following assignment addresses the handling of goodwill in accordance with the Danish Financial Statements Act and IFRS. The assignment is prepared as part of our completion of HD part 2 Accounting and Economic Management at Copenhagen Business School. The overall issue addressed in this assignment is “How does The Danish Financial Statements Act and IFRS define goodwill and what are the core differences between the two statutory accounting requirements, including what are the requirements for a transition from the Danish Financial Statement Act to IFRS?”. Initially our assignment describes the definition of goodwill, and the subsequent recognition, measurement and disclosures related to goodwill in accordance with the two statutory accounting requirements. Subsequently, we perform an analysis of the differences between the two statutory accounting requirements based on the knowledge obtained in the descriptive part of the assignment combined with interviews of relevant professionals in this field and analysis of how companies reporting in accordance with respectively the Danish Financial Statements Act and IFRS are handling of the recognised goodwill in their financial statements. During our assignment, we found that the primary differences between the two statutory accounting requirements are: The number of assets defined as a separate asset instead of included in goodwill in connection with a business combination. ● The definition of which company is the acquiring company in a business combination. ● The number and types of methods available for calculation of the goodwill value, including the factors permitted to include in the calculation. ● The definition of goodwill as an asset with a definite or indefinite economic life time. ● Yearly depreciation versus yearly impairment test. ● The handling of negative goodwill - either as an accrued income or an income in the income statement for the year in which it occurs. ● The possibility for revaluation of the goodwill value and reversal of previously performed impairment. As described above we included an analysis of different types of companies’ handling of goodwill, in connection with our analysis of the differences between the Danish Financial Statements Act and IFRS. The analysis included different types of companies in terms of ownership of the company, industry and applied statutory accounting requirements. During this analysis, we identified that the definition and levels of Cash Generating Units (CGU) applied in the different companies are different in terms of size of CGU and level in Side 3 af 102 the organization for the CGU. This results in different timing, frequency and general extent of impairment of goodwill for companies with identified goodwill in accordance with IFRS. In regards to the companies with identified goodwill in accordance with the Danish Financial Statement Act, the goodwill was in general depreciated over a relative short period, within 5 years, compared the maximum limit of 20 years according to the Danish Financial Statement Act. We have concluded that there are different opinions between professionals in this field in terms of what gives the most true and fair view of the financial statements in regards to the handling of goodwill, which is also shown by the responses received from our interviews. In general terms both statutory accounting requirements are accepted as resulting in financial statements with a true and fair view of the financial status of the company, but seen from an academic point of view there are different views towards the handling of goodwill. Both the Danish Financial Statements Act and IFRS are changing in these years, including the accounting requiements of goodwill, with a new Danish Financial Statements Act from 2016 and a Post Implementation Review of IFRS 3, regarding business combinations including goodwill, resulting in a more similar accounting requirement from both sides including possible changes in regards to whether or not goodwill should be depreciated according to IFRS going forth.

EducationsGraduate Diploma in Financial and Management Accounting, (Diploma Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages102