UAE takeovers: Listed companies to follow new rules on 'goodwill' cost

Dubai: New rules on ‘goodwill’ will come into effect for UAE’s public listed companies, and which will be of particular importance when it comes to mergers and acquisitions.

The new regulatory framework on goodwill factor has been approved by the board of UAE’s Securities & Commodities Authority.

The SCA move recognizes a company’s ‘goodwill’ as an intangible asset, and factors in the entity’s brand strength and corporate reputation.

“The framework aims to promote compliance with international accounting standards,” said the SCA. “And establish clear valuation principles to support boards of directors, audit committees, and external auditors, while enhancing transparency and investor disclosure practices.”

How goodwill is factored in

Assume a company acquires another business for Dh5 million. Say, the second company’s net assets (that is assets devoid of liabilities) are valued at Dh4 million. In such a case, the first company will show the deal with Dh1 million as the ‘goodwill’ cost.

The key point is that a goodwill value only takes effect when acquired by another company – there is no way it can be created internally.

The UAE corporate scene is witness to multiple M&A actions, especially among listed companies. DFM-listed Gulf Navigation's been busy, while ADX-listed Multiple Group and Emirates Driving have done their parts too.

Equally busy has been the SCA, which brought out back to back regulations governing social media financial influencers (finfluencers) and on funds using robo-advisers.

The latest SCA board meet reviewed outcomes from the 'launch of the region’s first-ever Finfluencer registration and authorization framework.

"This groundbreaking initiative is designed to reinforce transparency and safeguard investors, aligning with the rapid evolution of the digital financial sector," said a statement.