Amortization of Acquisition Costs (SF.IS.AmortAcqCosts)
Amortization of Acquisition Costs (SF.IS.AmortAcqCosts) refers to the value of capitalized company acquisition costs (goodwill) that have been allocated to the current accounting period. Goodwill refers to the excess of the price which is paid for the purchase of business over the fair market value of its identifiable tangible and intangible assets, less liabilities. Amortization of goodwill consists of the periodic reduction of the premium paid in the acquisition over the company’s value.
As per International Financial Reporting Standards (IFRS) and U.S. GAAP, the amortization of goodwill is no longer permitted. However, it is still allowed in many local accounting standards.
Amortization of Acquisition Costs (SF.IS.AmortAcqCosts) refers to the cost reported in the income statement, or in the notes to the income statement. It is used for items that are reported outside of the cost of goods sold.
If the amortization of goodwill is presented as part of the cost of goods and services sold, it is classified as Cost of Revenue (SF.IS.CostOfRevenue). The full value of goodwill amortization, including the portion reported within the cost of revenue, is shown in the supplemental footnote (Amortization of Acquisition Costs, Supplemental (SF.Notes.IS.AmortofAcquisitionCostsSuppl)).
Amortization of Acquisition Costs (SF.IS.AmortAcqCosts) includes:
- Amortization of the excess of the purchase price over the value of acquired companies (amortization of goodwill) and
- Amortization of the excess of the value of acquired companies over their purchase price (amortization of negative goodwill)
Amortization of Acquisition Costs (SF.IS.AmortAcqCosts) does not include:
- Amortization of goodwill disclosed within the cost of goods sold (classified as Cost of Revenue (SF.IS.CostOfRevenue))
- Amortization of capitalized R&D costs and other intangibles acquired through a business acquisition, if these assets are still disclosed as intangibles (different than goodwill) on the balance sheet following the acquisition, Amortization of acquired software costs or capitalized software programming costs and Amortization of technology and licenses acquired (classified as Amortization of Intangibles (SF.IS.AmortIntangibles))
- Impairment of goodwill/acquisition costs (classified as Impairment- Assets Held for Use (SF.IS.Impairment_AssetsHeldForUse))
- Negative goodwill recognized (classified as Other Unusual Expense (Income) (SF.IS.OtherUnusualExp))
- Items labeled as amortization of goodwill/acquisition costs, disclosed by companies reporting in the IFRS, in the U.S. GAAP or in other accounting standards that do not allow the amortization of goodwill (classified as Impairment- Assets Held for Use (SF.IS.Impairment_AssetsHeldForUse))