This assignment covers one of the most controversial topics of all times in the field of accounting; which is goodwill. We discuss the general view of goodwill and talk about goodwill valuation is books and from there we discuss the accounting practices for goodwill around the world which covers various countries in different parts of the world and look into the depths of goodwill controversy. Lastly, the method of goodwill valuation is discussed.
1. What is your impression of goodwill of a business in a general sense? How does it differ from the concept of goodwill in accounting?
An account that can be found in the assets portion of a company 's balance sheet is called as goodwill. Goodwill can often arise when one company is purchased by another company. In an acquisition, the amount paid for the company over book value usually accounts for the target firm 's intangible assets. Goodwill is seen as an intangible asset on the balance sheet because it is not a physical asset like buildings or equipment. Goodwill typically reflects the value of intangible assets such as a strong brand name, good customer relations, good employee relations and any patents or proprietary technology.
In other words, goodwill is the amount in excess of the company 's book value that a purchaser would be willing to pay to acquire it. This ability to command a premium price for a business is the result of goodwill. If a sale is realized, the new owner of the company lists the difference between book value and the price paid as goodwill in financial statements.
The sale of a business may involve a number of intangible assets. Some of these may be specifically identifiable intangibles such as trademarks, patents, copyrights, licensing agreements that can be assigned a value. The remaining intangibles which may include the business 's reputation, brand names, customer lists, unique market position, knowledge of new technology, good location, and special skills or operating
References: http://www.investopedia.com/terms/g/goodwill.asp http://www.businessdictionary.com/definition/goodwill.html#ixzz2ji3uDYLR http://www.investopedia.com/terms/p/poolingofinterests.asp http://www.riker.com/publications/fasb-ends-pooling-of-interests-in-accounting-for-mergers-and-acquisitions http://en.wikibooks.org/wiki/Intermediate_Accounting/Assets