The following article will guide you about how are goodwill impairment losses recognized. SFAS 142 – Goodwill and Intangible Assets: In SFAS 142, "Goodwill and Other Intangible Assets," July 2001, the FASB approved significant changes in the way income is determined for combined business entities. The most prominent of these changes is that goodwill is no longer amortized systematically over [...]
In this article we will discuss about:- 1. Definition of Goodwill 2. Nature of Goodwill 3. Features 4. Need for Valuation 5. Accounting Treatment. Definition of Goodwill: Goodwill is a thing easy to describe, but very difficult to define. It is the benefit and advantage of good name, reputation and connection of a business. It is the attractive force which [...]
The following are the methods of evaluating goodwill:- 1. Average Profit Method 2. Super Profit Method 3. Capitalisation Method 4. Annuity Method. Method # 1. Average Profit Method: Under this method goodwill is valued on the basis of an agreed number of years' purchase of the average maintainable profits. The maintainable profit indicates the adjusted profit. To get the adjusted [...]