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Purchased goodwill arises as a result of a purchase transaction.
It will be recognised withtin the accounts because at a specific point in time the face of purchase has established a figure of value for the business as a whole which can be compared with the fair value of the individual assets acquired, and this figure will be incorporated in the accounts of the acquiring business as the cost of the acquisition.
The goodwill arising on an acquisition to be recognised as an asset and amortised over its useful life. The useful life taken should not normally exceed twenty years, but a longer life may be taken if it can be justified by the circumstances.
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