Which of the following is incorrect in respect of goodwill?

Goodwill is a fictitious asset

The correct answer is option 1- Goodwill is a fictitious asset.

Goodwill is a fictitious asset is incorrect as it is an intangible asset.

The Accounting Standard-26 comes into effect in respect of expenditure incurred on intangible items during the accounting periods commencing on or after April 1, 2003. As per the Standard, Intangible Asset under AS 26 is defined as an identifiable, non-monetary, without physical existence and held for use in the production or supply of goods or services for rental to others or for administrative purposes.

Significant requirements of AS 26 w.r.t Intangible Assets:

1. Intangible asset should be recognised by fulfilling the criteria as recognised under AS 26.
2. If an in asset does not satisfy recognition criteria, it should be expensed.
3. Internally generated goodwill should not be recognised as an asset.
4. Internally generated brands, mastheads, and publishing titles and other similar in substance should not be recognised as intangible assets.
5. Internally generated assets other than the goodwill, brands, mastheads, and publishing titles may be recognised provided they satisfy recognition criteria as prescribed by AS 26.
6. Intangible assets should be written off as early as possible but not exceeding its estimated life, which normally should not be beyond 10 years.