Case: Indrayani Ltd acquires Sumitra Ltd in an amalgamation in the nature of purchase. The purchase consideration exceeds the fair value of net assets acquired by ₹9,00,000. Under AS 14, the resulting goodwill should normally be:

Correct answer: B) Amortised to income on a systematic basis over its useful life, which should not exceed five years unless a longer period is justified

Explanation

AS 14 requires goodwill arising on amalgamation to be amortised systematically over its useful life. It presumes that the period should not exceed five years unless a somewhat longer period can be justified. Non-amortisation with annual impairment testing is the Ind AS approach, not AS 14.