Under Indian GAAP (as per Schedule III of the Companies Act, 2013), how is goodwill classified in the balance sheet, and what is its treatment regarding amortisation?
Answer
Goodwill is classified as an intangible asset (non‑current) and is not amortised; it is tested for impairment annually.
The correct answer is Goodwill is classified as an intangible asset (non‑current) and is not amortised; it is tested for impairment annually. — Therefore, goodwill is not amortised but is subject to annual impairment testing.
Step-by-step solution
- Identify the classification prescribed in Schedule III – goodwill appears under intangible assets, non‑current.
- Recall the accounting treatment – Indian GAAP does not require systematic amortisation of goodwill.
- Therefore, goodwill is not amortised but is subject to annual impairment testing.
Common mistake: Treating goodwill as a depreciable tangible asset
Concept tested: Classification and amortisation of goodwill
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