Goodwill recognition in Malawian Banking Industry – Fair Value Based Approach

Very often than not, business acquisition results in recognition of goodwill as the consideration paid to gain control of the acquiree is higher than the fair value of the net assets acquired to compensate for synergies which acquirer benefits from the business combination. Negative goodwill is a rare phenomenon and must be justified and so is impairment of goodwill which requires proper disclosures. The results of this study indicate that auditors failed to make proper pronouncements for incorrect recognition of full impairment loss on goodwill, negative goodwill and adoption of full goodwill which includes non-controlling interest in the business acquisition transaction. There is need for regulators to look into the results of this study and make necessary directives on recognition of goodwill to comply with appropriate International Financial Reporting Standards (IFRSs) embedded in 2013 Malawi Companies Act