Can goodwill be revalued or written back up

No. Under FRS 102 purchased goodwill is carried at cost less amortisation and impairment, with no revaluation option, and a goodwill impairment can never be reversed. Company law says the same: only goodwill acquired for valuable consideration can go on the balance sheet, and a write down of goodwill must not be written back. If the business has grown in value since it was bought, that growth is internally generated goodwill, and it stays off the balance sheet until the business is sold.

Why can other intangible assets be revalued but not goodwill?

Section 18 of FRS 102, which covers intangible assets, offers a choice between the cost model and the revaluation model in paragraph 18.18. But paragraph 18.1 takes goodwill out of Section 18 altogether and sends it to Section 19, Business Combinations and Goodwill. Section 19 has no revaluation option. Paragraph 19.23 says that after initial recognition goodwill is measured at cost less accumulated amortisation and accumulated impairment losses. That is the only model allowed.

Even for the intangibles that can be revalued, paragraph 18.18B allows it only where fair value can be determined by reference to an active market. Goodwill is by definition the part of a business’s value that cannot be identified and sold separately, so no active market for it could exist.

Company law backs this up. Paragraph 32(1) of Schedule 1 to the Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410), and the same paragraph in the small company regulations (SI 2008/409), allows intangible fixed assets “other than goodwill” to be included at current cost under the alternative accounting rules. Goodwill is expressly left out. For the wider revaluation rules see FRS 102 Section 18: intangible assets and revaluing fixed assets.

Why can a goodwill impairment never be written back?

FRS 102 paragraph 27.28 is short: an impairment loss recognised for goodwill shall not be reversed in a subsequent period. For other assets, paragraph 27.29 requires a reversal when the reasons for the impairment have ceased to apply.

The logic is that once goodwill has been written down, any later recovery in the value of the business cannot be separated from new goodwill the business has built for itself since. Writing the old goodwill back up would in substance put internally generated goodwill on the balance sheet, which paragraph 18.8C(f) forbids.

The regulations reach the same place. Schedule 1 paragraph 20(1) normally requires a provision for diminution in value to be written back when the reasons for it no longer apply, but paragraph 20(1A) says that a provision made in respect of goodwill must not be written back to any extent. Both SI 2008/410 and SI 2008/409 contain this rule. The mechanics of reversals for other assets are covered in can an impairment loss be reversed.

What if the business is now worth far more than the goodwill figure?

That is normal and the accounts are not wrong. Goodwill on the balance sheet only records what was paid for a business in a past acquisition, above the fair value of its identifiable net assets. Schedule 1 to both sets of regulations allows goodwill to be included only to the extent it was acquired for valuable consideration. Everything the business has built since, such as a stronger customer base, a better reputation or a more profitable team, is internally generated goodwill and is expensed as it is created.

Illustration only. A company bought a competitor five years ago and recognised goodwill of £500,000, amortised over ten years. Two years ago a contract loss led to an impairment of £100,000. After amortisation and that impairment, the carrying amount today is about £180,000. The business has since recovered and a buyer has offered £3 million for the whole company.

• The goodwill cannot be revalued to reflect the offer, because Section 19 has no revaluation model.
• The £100,000 impairment cannot be reversed, because of paragraph 27.28.
• Amortisation continues on the reduced carrying amount over the remaining life.
• The value the buyer sees is recognised only by the buyer, in its own accounts, if it acquires the business.

Can the useful life or amortisation be changed instead?

Paragraph 19.23(a) applies the Section 18 amortisation rules to goodwill. Under paragraph 18.24, if there are indications that the useful life has changed, the entity reviews its estimate and accounts for any change prospectively as a change in accounting estimate. A longer useful life spreads the remaining carrying amount over more years and lowers the annual charge.

That is a genuine reassessment, not a way to reflect value growth. It cannot increase the carrying amount, and past amortisation is not written back. Where the useful life cannot be estimated reliably, paragraph 19.23(a) caps it at ten years. More detail is on our page about goodwill useful life and amortisation.

Can a new acquisition or reorganisation create more goodwill?

Each business combination gives rise to its own goodwill, measured under paragraph 19.22 as the excess of the cost of that combination over the acquirer’s interest in the identifiable net assets acquired. Buying a second business therefore adds new goodwill for that business. It does not top up the goodwill on the first.

A sole trader or partnership that incorporates and sells its business to its own company is a different case, because the company is paying for goodwill the owners built. Whether and how that goodwill is recognised, and how it is valued, is covered in goodwill on incorporation. The process for measuring goodwill on an acquisition is set out in FRS 102 Section 19.

Is there any tax consequence?

For companies, intangible fixed assets fall under Part 8 of the Corporation Tax Act 2009, which generally follows the accounts. Section 723 brings a taxable credit into account where there is an increase in the accounting value of an intangible fixed asset on a revaluation, including the restoration of past losses, limited to the net tax debits previously given. Because the accounts cannot revalue goodwill or reverse a goodwill impairment, that section has nothing to bite on for goodwill. The growth in value is taxed, if at all, when the business or the company’s shares are sold.

How can the growth in value be shown to users?

The balance sheet is not the place for it, but the rest of the annual report can help. Where a strategic report is prepared, it can describe how the business has performed and developed. Directors can also explain in a note that goodwill is carried at historical cost and does not reflect the current value of the business. Lenders and investors who need a value will commission a valuation, which sits outside the statutory accounts.

What mistakes come up most often?

• Booking a revaluation of goodwill to a revaluation reserve. This breaches both FRS 102 and Schedule 1, and auditors will reverse it.
• Writing back an earlier goodwill impairment because trading has recovered.
• Recognising goodwill the company has built itself, for example after a valuation for a share scheme or a bank.
• Extending the useful life to avoid amortisation without real evidence that the life has changed.
• Assuming a valuation report changes the accounts. It may matter for a sale, a share scheme or a loan, but not for the balance sheet figure.

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Related Accountapedia entries

• Written resolutions for private companies
• Life insurance written in trust and IHT
• Writing off a director’s loan
• Written statement of employment particulars
• Who owns partnership property and goodwill

Sources

• Financial Reporting Council: FRS 102 September 2024 tmKYWO6
• legislation.gov.uk: SI 2008/410, schedule 1
• legislation.gov.uk: SI 2008/409, schedule 1
• legislation.gov.uk: Act 2009 c. 4, section 723

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.