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Goodwill and its amortization

We update again, this time, going back in time. Specifically, on July 21, 2015, in which it was published in

We update again, this time, going back in time. Specifically, on July 21, 2015, in which it was published in the Official State Gazette (BOE), Law 22/2015, of July 20, on Accounts Audit, which included a relevant modification in fiscal matters, which affects the intangible immobilized, both those of defined useful life, and indefinite, among which is the trade fund, or Goodwill, in voice.

We talk about intangibles, and also, assets

talking about intangibles is a thing and intangible assets is another good. And it is that the exercise of counting the intangible as an asset is given, in the first place, of a tangibilization, that allows its treatment as such. To do this, in the first place, recognition as an asset will take place when that intangible can meet two criteria: that it is identifiable and that also can generate economic benefits or returns for the company in the future, being valued concretely.

The identification and assessment of intangible immobilized is one of the most delicate aspects of companies accounting. It is necessary, therefore, that the certain element is identifiable, separable, and therefore, exploitable, understanding it as if given the case, it could be sold, yielded or leased. Thus, the intangible asset must also be valuable for its cost, either for the acquisition price, or for the cost of production.

The cost of an intangible asset generated internally by the company itself will include all the directly attributable costs necessary to create, produce and prepare the asset for its operation. That would include:

  • The costs of materials and services used or consumed in the generation of the asset.
  • The costs of remuneration to employees derived from the generation of the asset.
  • The fees to register the right.
  • The amortization of patents and licenses that are used to generate it.

amortizations and their changes through the law

A posteriori of its primary recognition, and throughout its useful life, until its cessation or decline, the elements of the intangible immobilized will be assessed by its cost, except the accumulated amortization and the accumulated amount of the corrections made by deterioration.

Prior to Law 22/2015, of July 20, on Audit of Accounts, we found two categories for amortization:

  • Intangible assets of defined useful life, that is, those finite stipulated by contract, such as: transfer rights, administrative concessions, industrial property rights such as patents, rights of use, computer applications, surface rights or temporary usufruct .
  • Intangible assets of indefinite useful life, that is, those not finite, nor completely stipulated by contract, such as the brand or reputation, ascribing them to the so -called trade funds.

After the entry into force of the law, last 06/21/2015, the following changes are arranged:

  • Intangible immobilized people recognized accounting will have a single category, that of being of defined useful life, thus disappearing the distinction with those of indefinite useful life. However, a new subcategory arises, “intangible immobilized whose useful life cannot be estimated in a reliable way”, which in the accounting sphere, means that they will be amortized within 10 years, unless other legal or regulatory provision establishes a term different, greater or minor.
  • Commerce funds may appear in the asset when they have been acquired for a burdensome. Its amount will be the subject of amortization, and its useful life will be presumed, except proof to the contrary in relation to it, which is 10 years.

meaning and explanation of the law

As observed, the way to establish a system of systematic amortization for all these elements has been somewhat complex, especially in those intregible above as ‘indefinite useful life’, precisely because of its character not easily determinable as finite- and Objective-, which, in itself, is important efforts to close and undertake it, hence measures have been sought to establish broader categories.

This mercantile modification also has tax consequences. Specifically, in the provisions of articles 12 and 13 of Law 27/2014 of the Corporation Tax, where for example, in Art. 12, 2nd we find:

“Intangible immobilized will be amortized according to its useful life. When it cannot be estimated reliably, amortization will be deductible with the maximum annual limit of twenty part of its amount. The amortization of the trade fund will be deductible with the maximum annual limit of the twenties part of its amount. ”

In this way, the main novelty is that the fiscal amortization of the trade fund is allowed, as well as other intangibles in which its useful life cannot be reliably estimated, with the maximum annual limit of 5%. In addition, the change considerably cuts the years in which the deduction of these intangible assets of indefinite useful life was calculated, specifically, from 20 to 10.

An accounting imputation for amortizations for its fiscal deductibility is now required. The difference between the existing percentage in accounting matters (in principle, 10%), and in the fiscal scope (5%), will determine the practice of adjustments in the tax base of the Corporation Tax.

specifying cases

This new tax regime will charge validity for the tax periods that are initiated as of January 1, 2016, not applying to intangible assets, including the trade fund, acquired in tax periods initiated prior to January 1, 2015, to entities of the group of companies according to article 42 of the Commercial Code, regardless of residence and the obligation to formulate consolidated annual accounts.

In this line, other examples that we can find are those trade funds originated by merger processes or other fiscally protected operations, in which there is special tax regulations -by virtue of Law 27/2014 -, which includes different transient regimes applicable to acquisitions prior to 2015, and that in general, deprives fiscal effects to its amortization.

From Verum Management we are aware of the constant reconversion and update processes of the legislation corresponding to tax, labor and accounting matters. We understand our business as an extension of value to the realities of our clients, therefore, we always bet on a personalized treatment.

The Goodwill is an element that requires effort, resources and time in its identification, quantification and subsequent accounting treatment, therefore, it is always positive to have a technical and professional assistance for the amortization of the amortization of the same. More: <a “href=” mailto: “>


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