Two questions from dentist GDPUK members are answered by Ian Hardcastle, Head of UK Healthcare Banking for NatWest Bank.

Based in Manchester, Ian is in contact daily with healthcare professionals, and with his team of specialist and knowledgable colleagues, who between them cover the whole of the UK.

Technically a late payment will constitute a breach of loan condition regardless of the current loan balance and this will give the lender the opportunity to re negotiate facilities. Normal practice would be to contact the customer via telephone or by a meeting invitation to discuss current cashflow and the options available to the client with regards to re scheduling the loan repayments. As with most facilities, clients are usually given the option to make voluntary payments during the course of a loan facility, however these cannot usually be off set against missed or late payments. My advice would be to ask for a meeting with your relationship manager to discuss your individual case ".

Firstly, how is goodwill treated in the accounts of any dental companies he has dealt with? Specifically, in his experience which accountancy rules do dental companies tend to use?

Secondly, would he recommend using

1. Statement of Standard Accounting Practice 22
2. Financial Reporting Standard 10, or,
3. International Accounting Standard 38?

The choice appears to me to have a significant impact on reported profits, and treatment of goodwill in particular once it is owned by the company.

Basically, should goodwill be written off, amortised or held as an asset?

“Accounting policies are put in place at the beginning of the first accounting period. Each company can have differing policies due to the varying reasons behind them. You must be able to justify why you have adopted a particular policy/method and you must be consistent year on year. The chosen policies must also comply with the relevant accounting standards. For example the purchased goodwill in dentist limited company accounts is based upon a patient list at a particular point in time and as these patients leave/die the value of this purchased goodwill decreases and therefore should be written off over an appropriate number of years. New patients replacing them would be classed as internally generated goodwill and therefore would not be recognised in the financial statements. This internally generated goodwill is recognised upon selling the business.

SSAP 22 is now out of date and was replaced by FRS 10. FRS 10 states that an intangible asset (i.e. goodwill) is to be charged to the profit and loss (i.e. amortised) in the periods in which it is depleted and must be reviewed annually for impairment. It also states that sufficient information should be disclosed in the financial statements to enable the users of the financial statements to determine the impact of the intangible asset on the position and performance of the reporting entity.

We are slowly moving towards international standards. IAS 38 is the international standard that deals with the treatment of goodwill. Its implications are largely the same as FRS 10 (detailed above) but also states that this standard should be followed when no other is in place. The full objectives of IAS 38 can be found at www.iasb.org

To summarise, the majority of small limited companies use the Financial Reporting Standards for Small Entities (FRSSE) which includes the requirements of FRS 10. Goodwill should be capitalised, classified as an asset on the balance sheet and amortised on a straight line basis over its useful economic life. It is reviewed for impairment at the end of the first full financial year following the acquisition and in any other period where events or changes in circumstances indicate that the carrying value may not be recoverable”

This answer has been given by Dodd & Co http://www.doddaccountants.co.uk/

GDPUK members are invited to submit questions using the Contact form on the site, or by email to Tony Jacobs.

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