My client has just purchased a going concern business, and there is some goodwill included in the purchase price. How do I account for this in the accounts?
Purchased goodwill should be capitalised and then amortised over a period not exceeding 20 years. Therefore to include goodwill, debit a goodwill account on the balance sheet. Your client’s accountant will need to determine the period for amortisation, and also check to ensure there has been no impairment (reduction in value) in the year.