Accounting of Goodwill

A Review On The Accounting Of Goodwill In The Past Twenty Year

Introduction

The concept of Goodwill in accounting has been widely used and cannot be neglected. Goodwill is an intangible asset that typically occurs when a company purchases another business or something that increase the value of the company in terms of reputation. This is beneficial when company sells it operations, besides giving the market value for that company, the buyer pay extra amount for the reputation of that company in the market. This is a giving an overvalue amount and located on the balance sheet as a Goodwill. Companies can also acquire other companies paying a set dollar amount equal to the division of the company or amounts of previous accounting net income, which generally do not include amounts of goodwill.

Objective of the Research

The objective of this research is to the accounting Goodwill in the past twenty years with respect to AICPA, GAAP, IFRRS, SEC, Amortization, Impairment Test On Goodwill.

Research Questions

The following are the question on which the entire paper will be based on.

The accounting for goodwill

New goodwill accounting rule,

The effect of the new goodwill accounting rules on financial statements,

International accounting treatment of goodwill,

The problem of accounting for goodwill and brands,

Solution of goodwill problem

Discussion

The Accounting for Goodwill

Goodwill is one of the specific types of assets present in the consolidated financial statements. Goodwill arises only at the time of acquisition of shares in the company or as a result of the merger (but from the standpoint of international standards for the merger process is regarded as identical to the purchase). The goodwill is treated as non-current assets with indefinite useful lives, as international standards describes the future economic benefits arising from assets that cannot be separately identified and recognized in accordance with the standards for business combinations (IAS 27, IFRS 3 and SFAS 141r, SFAS 160 and ARB 51). As a rule, goodwill is included in the personnel of the company, the prospects for the market in which it operates, the synergistic effect of the combination (Ketz, E. 1998).

Its main features are:

Inability to separate its implementation - goodwill as an asset linked directly to the subsidiary and the investment in it, and so on disposal of investments is eliminated and the net book value of goodwill;

Its evaluation does not depend directly on the value of the investment - in the evaluation of goodwill must also be considered and reflected in the reported amounts of assets and liabilities of a subsidiary (contingent liabilities and internally generated intangible assets);

Its evaluation can vary greatly during the period - Valuation is based on certain assumptions that may not justify;

Its evaluation can be very subjective - different acquiring companies may have different assess future economic benefits of joint action as a result of the fact that it is caused by factors that are difficult to determine reliably;

Goodwill may be either internally generated or arise in the acquisition - the price of the acquisition of the company may be caused by political reasons, the agreement ...