Amortization of goodwill
April 15, 2012 | 25,00 EUR | answered by Dr. Yanqiong Bolik
Dear Sir or Madam,
Entrepreneur A has purchased a pension from Entrepreneur B, valued at €34,990. There is a business transfer according to the agreement. The entire inventory of B was purchased along with the pension. There is an inventory list available. Therefore, the purchase price was exactly the same as the value of the inventory on the specified date, without VAT. How should A now depreciate and book this? How should A also book if any items from the inventory get damaged or disposed of over time? (A has also deposited and withdrawn cash. Everything is included and booked in the capital: €60,000 in capital that was deposited. Does the capital play a role in booking the depreciation of the goodwill?)
Thank you in advance for your response.
M.Förster
Dear inquirer,
Thank you for your inquiry, which I am happy to answer taking into account your effort and the rules of this platform.
Please note that my explanation is based on the facts presented, and that adding, omitting, changing information, or the ambiguity of information can change the tax result.
According to the scenario described, A is a sole proprietor and the purchase price of the pension corresponds to the market value of the acquired assets. Apparently, no additional payment was made for goodwill. Therefore, A cannot depreciate goodwill, as depreciation is only allowed for goodwill acquired for consideration.
On the acquisition date, A must allocate the purchase price to individual assets purchased according to the inventory list. This way, A obtains the acquisition costs of these assets. These acquisition costs are to be depreciated over their useful life. A records the depreciation as an operating expense: depreciation on equipment.
If an asset becomes damaged or is disposed of, A must record the remaining book value of this asset as an operating expense: other operating expenses on equipment.
If the contribution of 60,000 EUR is made in cash, A records: cash to equity contribution (shareholders' equity). The withdrawal is recorded as: withdrawal from equity to cash. In general, capital does not play a role in booking the depreciation of goodwill. But in your case, there is no depreciable goodwill.
I hope I was able to assist you.
If there are still uncertainties, please feel free to use the follow-up function.
Best regards,
Dr. Yanqiong Bolik
Tax consultant
Bildstöckle 6, 70567 Stuttgart
Tel: +49 (0)711 / 2132 1815
Email: info@zdbz.de
www.steuerberatung.zdbz.de
