IAS 38Chapter 6Lesson 2
Internally generated goodwill, brands and customer lists: what never reaches the balance sheet
Step 1 of 9Learning objectives
Go deeper+1 calculation · +1 journal entry
Year after year, a business builds a reputation, a loyal customer base, well-known brands and customer files. These items often have great economic value, but when they are internally generated, IAS 38 prohibits recognising them as assets: internal goodwill is not an identifiable resource measurable at cost, and the cost of an internally created brand or customer list cannot be distinguished from the cost of developing the business. The related expenditure remains an expense.
18 minNot started
Learning objectives
- Explain why internally generated goodwill is never recognised as an asset, and distinguish it from goodwill acquired in a business combination.
- Identify the internally generated items that are never recognised: brands, mastheads, publishing titles, customer lists and similar items.
- Analyse the treatment of an internally created brand compared with a purchased brand, then record a launch budget as expenses.