The amount of goodwill recognised across European companies is increasing rapidly, with a jump from €935bn (£818bn) in 2005 to €1.341bn in 2014, representing an increase of 43% over a seven-year period, particularly in telecoms and the financial services sectors
The figures were released by the European Financial Reporting Advisory Group (EGRAG) as part of a pan-European study of 328 companies, reviewing the use of goodwill and impairment, and comparing European practice with US, Australian and Japanese companies.
The study has been released to stimulate debate about goodwill and EFRAG is looking for feedback from key stakeholders over the future evolution of goodwill and potential areas for reform.
Overall, the US and Europe had larger total and average per company amounts of goodwill than Japan and Australia; although the total amount of goodwill increased globally over the period analysed. For the US and Europe, impairment losses ranged from 1%-5% of the opening balance of goodwill for the period.
The ratio for Japan, including goodwill amortisation, was between 10% and 14%. A relatively small number of companies recorded impairment losses. The percentage was higher for Europe than the other indices.
In Europe, goodwill is concentrated at a small number of companies, which account for a large share of the carrying amount of goodwill although the level of concentration has been decreasing slightly over time.
