Goodwill Amortization in the Italian Civil Code: Estimation Poblems and a Methodological Proposal

In regulating the financial statements, the amortization of goodwill
represents a complex problem that requires a careful assessment of the
economic conditions of the firm and their foreseeable evolution. This study
aimed to analyze the topic with specific regard to the Italian context, in order
to identify the parameters useful for guiding the amortization processes, in
compliance with the limits set by the legislation on financial statements. To
this end, the study used a methodology based on the legal-economic analysis
of the evolution of Italian legislation from 1882 to today and its effects on the
economic valuations implied by amortization. The results show that the
accounting for goodwill has changed over time, being characterized in the first
phase by the prevalence of conservative accounting and by the consequent
need to amortize goodwill in the shortest possible time. Subsequently, the
accrual basis prevailed over conservatism, and today the basic rule is
represented by the useful life of goodwill. The originality of this study lies in
the multidisciplinary approach which, by combining the economic
interpretation of the company with the legal rules on reporting, proposes an
analysis model applicable in the practice of companies that prepare their
financial statements according to the Civil Code.