ASIC has welcomed the decision by ASX-listed Primary Health Care Limited (Primary) to reduce goodwill previously recorded for payments it makes to general practitioners when joining its network of medical clinics under contract generally for 5 years.

Following ASIC’s inquiries, Primary has determined that, while a portion of payments will continue to be accounted for as goodwill, the significant majority of the payments will be treated as intangible assets and amortised over the life of the relevant contract.

Primary has now reduced goodwill by $426.2 million as a prior period adjustment in its results for the half-year ended 31 December 2014. The goodwill has been replaced by an identifiable intangible asset with an amortised amount of $139.9 million. Retained profits have been reduced by $290.4 million, representing past amortisation.

In ASIC’s view, the revised accounting treatment more appropriately reflects the substance of the transactions.