Question

Do you agree that the internally generated goodwill should be recognized as an assets? Critically justify your answer.

Answer 1

No , internally generated goodwill should not be recognized as an assets

1) IAS 38 sets out the criteria for recognising and measuring intangible assets and requires disclosures about them.
2) An intangible asset is an identifiable non-monetary asset without physical substance. Such an asset is identifiable when it is separable, or when it arises from contractual or other legal rights. Separable assets can be sold, transferred, licensed, etc.
3)Goodwill acquired in a business combination is accounted for in accordance with IFRS 3 and is outside the scope of IAS 38.
4) Internally generated goodwill is within the scope of IAS 38 but is not recognised as an asset because it is not an identifiable resource.
5) The cost of generating an intangible asset internally is often difficult to distinguish from the cost of maintaining or enhancing the entity’s operations or goodwill. For this reason, internally generated brands, mastheads, publishing titles, customer lists and similar items are not recognised as intangible assets