Firms may benefit in writing off good will

Friday 20th December 2002

Companies could benefit from more flexible rules for writing off goodwill when international accounting standards are adopted here.

Following new goodwill impairment rules in the US, the International Accounting Standards Board proposes companies should be allowed to write off goodwill only when they are shown to be impaired rather than in equal chunks over a maximum 20 years, as is the case now.

New Zealand accounting authorities recommended in October the adoption of IASB standards.

Australia will adopt the standards from January 1, 2005.

Commentators said the goodwill change would allow companies greater flexibility but would also mean a lot more work for finance executives in assessing whether different parts of the business justified their carrying value.

New Zealand's proposed adoption of international rules drew fire from accountants Hayes Knight, which argued they were appropriate for listed companies but would burden smaller businesses with crippling compliance issues.

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