Question

what suggestions could you make to improve the accounting treatment of Goodwill and IP Intangibles and how would they benefit entrepreneurship?

Answer 1

The bottleneck in reporting the goodwill or IP is regarding its valuation. It requires in depth analysis and expertise to bring out the correct market value of the property being acquired. In todays world where growth of the company is also determined by the intangible assets and knowledge management of the company, it is inevitable that company records a correct value for its intangible assets.

Some of the ways by which accounting treatment can be improved are as follows:

• The rules regarding the treatment of IA varies from country to counry, it is suggested that MNCs should follow a uniform approach in form of IFRS or make proper disclsoures for the varying treatments
• Approach of recording on FMV on benchmark basis be shifted to recording in Context approach. As in, a patent of a drug is of immense value to the Pharma Co. but is of liitle relevance for Car Manufacturer.
• Procedure of impairment test can also be made simpler by opting to record the weighted average of the value of the IA during the year rather than just the year end value.