Under UK GAAP, how is goodwill amortisation treated in terms of profit?

Goodwill amortization under UK GAAP is treated as a realized loss. This is because goodwill represents the excess amount paid during an acquisition over the fair value of identifiable net assets. As time passes, the value of goodwill is systematically reduced through amortization, reflecting a decrease in value that is recognized in the profit and loss account.

By categorizing goodwill amortization as a realized loss, it underscores that this expense represents an actual reduction in value, impacting the profitability of the business. This approach typically influences the reporting of profits, reducing the net income for the period in which the amortization is applied.

The other potential classifications, such as unrealised loss, operational costs, or non-operating expenses, do not accurately capture the nature of goodwill amortization as it directly reflects the ongoing valuation adjustment related to an asset that is expected to have a finite life under UK GAAP.