1 Goodwill Accounting under DAS and IFRS

Good Will accounting

1. Goodwill Accounting

2. Purchase Accounting Acquirer is identified Acquisition date is determined Acquisition price is determined on the acquisition date Assets and liabilities of the acquiree are identified and recognised at fair value Non-controlling interest is identified and measured at the acquisition date Goodwill is determined at the acquisition date and recognised in the financial statements of the acquiring party

3. Definition of Goodwill Theoretical Approach Goodwill is the present value of future excess profits of a legal entity Assumes it is possible to determine ordinary and excess profits Practical Approach Goodwill is approached from the legal entity's balance sheet IFRS 3 Definition Goodwill is an asset representing future economic benefits of other assets acquired in an acquisition Not individually identified and capitalized separately

4. Positive Goodwill: Types of Positive Goodwill Goodwill paid on the acquisition of the shares of a legal entity Dealt with in Art. 2:389(7) BW Goodwill paid upon the acquisition of the assets and liabilities of a company Asset/liability transaction Dealt with in Art. 2:365(1d) BW

5. Positive Goodwill: Initial Recognition of Positive Goodwill Positive goodwill recognized in balance sheet on acquisition date Per Art. 2:389(7) BW; RJ 216.218 Also recognized as an asset under IFRS 3 Measured as positive difference between acquisition price and fair value of identifiable assets/liabilities Includes third-party interest and fair value of previously acquired partial interest

6. IFRS 3 Goodwill under IFRS 3 Systematic amortization not required or allowed Measured at amount less deduction of accumulated impairment losses Economic life of goodwill not reliably estimable Annual impairment test performed If no impairment, goodwill remains on balance sheet

7. Directive 216 Capitalized goodwill must be amortized on a systematic basis Amortization period based on period of economic benefits to acquirer Rebuttable assumption of economic life not exceeding 20 years from acquisition date In exceptional cases, goodwill is amortized over a period not exceeding 10 years if economic life cannot be reliably estimated

8. Negative Goodwill Negative Goodwill: When the acquirer pays less than the fair value of the acquiree's assets and liabilities Caused by disadvantages not reflected in fair value May include need for reorganization or expected operational losses Acquisition price may be lower if seller is under pressure to sell

9. Guideline 216 Negative Goodwill and Future Losses Recognized as separate accrued liability item Credited to income statement as losses and charges arise Other Negative Goodwill Portion not exceeding fair value of identifiable non-monetary assets credited to income statement Proportional to average remaining useful life of amortizable assets acquired Portion in excess of fair value of identified non-monetary assets immediately credited to income statement

10. IFRS 3 Negative Goodwill Recognition Excess of fair values of assets and liabilities over acquisition cost Recognised immediately in profit or loss After reassessment and remeasurement No limiting factor in determining amount