Goodwill hunting: rule-setters eye accounting shake-up | Financial Times
Intense debate breaks out over earnings statements
✒ A succinct summary of the concept of goodwill — the bookkeeping legacy from takeover deals — and the evolution of accounting treatment for recording such on the balance sheet.
Despite some might favor amortisation for it provides certainty of expenses thus less volatile earnings, amortisation of goodwill may be proven artificial and provides no insight on company performance.
Moreover, assuming goodwill is a wasting asset like a heavy equipment could look arbitrary and/or counterintuitive given today’s businesses increasingly rely on different kinds of intangible assets to operate.
Without regular assessment of intangible assets, financial analysts really cannot be sure of a company’s true worth.