Darwin Ltd has acquired Hobart Ltd. The accountant, Ms Alice Springs, has shown the board of directors of Darwin Ltd the financial information regarding the acquisition. Ms Springs calculated a residual amount of $45 000 to be reported as goodwill in the accounts. The directors are not sure whether they want to record goodwill on Darwin Ltds statement of financial position. Some directors are not sure what goodwill is or why the company has bought it. Other directors even query whether goodwill is an asset, with some being concerned with future effects on the statement of profit or loss and other comprehensive income.

Required: Advise Ms Springs about the nature of goodwill and how to account for it now and in the future in accordance with Australian Accounting Standards. You are also required to specify the name of the accounting standard(s) relied on for your advice.