What kind of asset is goodwill? How do you determine the amount of goodwill? How do...

What kind of asset is goodwill? How do you determine the amount of goodwill? How do you treat goodwill subsequent to its acquisition?

Expert Solution

Goodwill is an intangible asset that is related with the acquisition of one organization by another. In particular, goodwill is the bit of the price tag that is higher than the net fair value of all of the assets purchased in the acquisition and the liabilities assumed in the process

Goodwill is equivalent to the average profits for a set time period, multiplied by the number of years. This is the easiest and the most widely recognized method to calculate goodwill. To summarize the formula: Goodwill = Average Profits X Number of Years

As direct measurement of the fair value of goodwill is clearly impossible, the U.S. accounting body inferred that a strategy like the technique for designating the price tag to the net assets obtained in a business blend would be utilized to by implication measure the estimation of goodwill resulting to its acquisition date. Thus, it concluded that the fair value of the net assets of an announcing unit be deducted from the reasonable estimation of that detailing unit to decide the implied fair value of goodwill.

ekkarill92 answered 2 years ago

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