What is goodwill

What is goodwill in Accounting concept.Please give some example.

2 Answers

  • ?
    Lv 6
    1 decade ago
    Favorite Answer

    According to SSAPs, goodwill is defined as the difference between the value of a business as a whole and the aggregate of the fair value of its separable net assets.

    Goodwill is also defined in following:

    1)Good location

    2)Good customers customers relations

    3)Good reputatiopn

    4)Well-Known product

    5)Experienced and efficient employees and management team

    6)Good relation with suppliers

    There are severally types of goodwill:

    Purchased Goodwill

    Purchased goodwill arising on the acquisition of one business by another is defined as the excess of the purchase price of the acquired business over the fair value of its net tangible and identifiable intangible assets. The pronouncements on accounting for goodwill in the United States and Canada apply equally to goodwill arising upon:

    Acquisition of the net assets of a business.

    Preparation of consolidated financial statements when the purchase method of accounting is followed for investments in companies consolidated, and

    Accounting for investments by the equity method.

    For example, Novell acquired Linux.

    Internally Developed Goodwill

    A broader concept of goodwill recognizes the economic value of a business' internally developed nonpurchased goodwill such as name, developed markets, managerial talent, labour force, government relations, ability to finance operations easily, etc. Such nonpurchased goodwill has not been recognized in the balance sheet and expenditures which may result in internally developed goodwill have not been capitalized. The primary reason for not accounting for goodwill developed in this manner is the absence of generally accepted objective methods of measurement.

    For example, brand name of McDonald.

    Business Combination and Goodwill

    Business combination are events or transactions in which two or more business enterprise or their net assets, are brought under common control as a single accounting entity. The term "Mergers and acquisitions" are also referred to as business combination.

  • 1 decade ago

    What is goodwill ??

    Goodwill is an asset, it's a value, it's money.

    Like Coca-cola, when they provide a new product, many people would like to drink.

    It's more easier than other new brand.

    Why? Because people trust them, Coca-cola is famous, it has goodwill.

    So, it can save a lots of money for promotion and advertisment.

    Understand ??

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