Nearly one-third of UK media companies will have to change their accounting policies to incorporate new accounting standards on goodwill and intangible assets, according to Andersen Consulting, writes Nick Huber.
Last year, the government introduced accounting standards FRS10 and FRS11 for the treatment of goodwill and intangible assets. The new standards will have a central role in the media industry which is heavily reliant on intangible assets.
Under the new rules assets like brands will have to be included on balance sheets and depreciated year-by-year, instead of being written-off.
A survey of 120 media finance directors found that 19% of them had included intangible assets, purchased externally, on their balance sheets. A further 10% had generated internal intangible assets on their books.
Nearly two-thirds of FDs intended to depreciate goodwill and other intangibles over their ‘useful’ 20-year lifecycle.
Rob Matthews, head of Arthur Andersen’s UK media practice, said goodwill was the key challenge for media FDs. ‘A business might not have any net assets, but you’ll still pay #10m for it in goodwill. But how long will it be of value? It’s a headache for companies,’ he said.
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