Hornby has goodwill on the Statement of Financial Position of £4,564,000 for the year ended 31 March 2020. Discuss the main advantages and disadvantages of treating goodwill as an asset for both Hornby’s shareholders and the management team. In your discussion you may want to consider the following; Does goodwill meet the International Accounting Standard’s Board definition of an asset Does the inclusion of goodwill on the Statement of Financial Position enhance the two fundamental qualitative characteristics of useful financial information; relevance and faithful representation Discussions regarding goodwill in academic journals and textbooks
(b) Show with workings what the impact would be on the key figures and ratios if goodwill was written off against retained earnings in the year ended 31 March 2020 i.e not included as an asset in the Statement of Financial Position.
(c) Briefly conclude whether you agree that goodwill should have been treated as an asset in Hornby’s financial statements.
