Official Letter No. 885 / BTC-QLKT dated Jan 22th 2020 of the Ministry of Finance about Accounting guidance regarding to goodwill.
This Official Letter guidelines on the accounting for “goodwill“ in case the Company acquires a business segment of another enterprise.
Accordingly, depending on acquiring the business segment is constituting a business activity or transaction not, the accounting will be different. As follows:
- If the acquisition of the business segment constitutes a business activity and this consolidation does not result in a parent company – subsidiary company relationship, goodwill (if any) incurred from this transaction will be reflected as an asset in the buyer’s individual financial statements to allocate gradually within 10 years.
- Conversely, if the acquisition does not constitute a business activity, the Company shall not record goodwill. The Company shall allocate it to the individual identifiable assets and liabilities based on their respective fair values at the date of acquisition.
Please kindly find detail in the attached file.