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91 91 UNIVERSITYofGLASGOW Department of Accounting and Finance Literature Review on New IFRSTreatment of Goodwill Dissertation Submitted in Part Fulfillment of theRequirements for the award of the Degree of MAcc inInternational Accounting Financial Management September 2008 Abstract Since IASB issued IFRS 3 and related amended version of IAS 36 and IAS 38 to replace the IAS 22, the accounting for goodwill has changed significantly. Instead of systematic amortise goodwill over a certain period, it should be tested for impairment at least annually. This amendment has caused many debates. There are both argument and agreement on this amendment. This literature aims to discuss these debates in depth in the academic area and find out whether the new treatment is prior to the former method, and its likely future development. This paper will firstly introduce the conceptual background of the goodwill accounting. And then discuss the argument against and the agreement on the revise. In the last section, it will compare and contrast the advantages and disadvantages of two treatments. Then analysis them in depth and apply to the different situations. The findings are the new standard made some achievement in goodwill accounting, and improved financial reporting. It can be seen as prior to the old one at the extent that more close to the business reality and promptly capture any changes in the market. The standards setters are liable to have more detailed principles on how to determine the fair value less cost to sell and the value in use. Key Words: goodwill, annual impairment testing, systematic amortization, creative accounting, management incentive, advantage and disadvantage Word count: 10147 Table of content TOC \o 1-5 \h \z Chapter 2 Research Method and Methodology 3 Research Method 3 Methodology 3 Chapter 3 Conceptual background 5 Definition, recognition and valuation of goodwill 5 The old treatment 6 The new treatment 7 HYPERLINK \l bookmark2 \o Curr