Intangible Assets and Goodwill: Q5

Q5: Is Goodwill an Intangible asset? Why or why not?


Goodwill is an aspect of a business that would be an intangible asset except it cannot be separately identified. We saw above that Intangible assets are defined as: 

“An intangible asset is an identifiable non-monetary asset without physical substance.” 

AASB 138 para 8

Goodwill is a non-monetary asset without physical substance, but is not specifically identifiable and so fails the definition of an Intangible asset. However, there is an exception to this when Goodwill is acquired as part of the purchase of another business (that is, in a business combination): 

“…If an item … does not meet the definition of an intangible asset, expenditure to acquire it or generate it internally is recognised as an expense when it is incurred. However, if the item is acquired in a business combination, it forms part of the goodwill recognised at the acquisition date (see paragraph 68).” 

AASB 138 para 10 

And AASB 138 para 68 says: 

“Expenditure on an intangible item shall be recognised as an expense when it is incurred unless:  

   (a)…; or  

   (b)     the item is acquired in a business combination and cannot be recognised as an intangible asset. If this is the case, it forms part of the amount recognised as goodwill at the acquisition date (see AASB 3 Business Combinations).”

Study Guide  Chap 5 page 5-19