Still too weak, still too flexible

Article Abstract:

The Statement of Standard Accounting Principles 22 (SSAP 22), published in 1984 by the Institute of Chartered Accountants of England and Wales, did not have adequate rules of disclosure regarding accounting of goodwill. In an attempt to address the deficiencies, the Institute has developed ED 44. Under SSAP 22 the share premium account was used to offset the goodwill. The situation allowed the purchaser to issue new shares while the vendor received cash. The share premium on the newly-issued shares was used to offset the goodwill so none of the goodwill appeared on the balance sheet. ED 44 would require separate disclosure of any material goodwill. ED 44 has been accused of being a temporary solution until a method can be found for properly accounting goodwill.

Institute of Chartered Accountants in England and Wales, Disclosure statements (Accounting)

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Why don't we start thinking negatively?

Article Abstract:

The UK Department of Trade and Industry (DTI) has issued proposals for implementing the Seventh Directive on consolidated accounts and for legal changes concerning merger and acquisition accounting. The DTI proposals would restrict certain creative accounting techniques, and although they appear sensible, accountants' reactions to them are sharply divided. The merger and acquisition issue is essentially a debate over goodwill accounting, and it is incumbent upon the Accounting Standards Committee (ASC) to clarify industry views on the matter in order to respond appropriately to the DTI.

United Kingdom. Department of Trade and Industry

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Where has all the goodwill gone?

Article Abstract:

The problems associated with accounting for mergers and acquisitions are discussed. The excessively flexible standards presently in use are too vulnerable to abuses. For accounting purposes, mergers should be distinguished from acquisitions, and restricted to cases in which no acquirer can be identified. Goodwill should be amortised through the profit and loss account, and the useful life period should not exceed 20 years. Negative goodwill write-off reserves should not be permitted.

Mergers, acquisitions and divestments, Corporations, Corporations, British

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