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 [...]
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 [...]
In this article we will discuss about the internal and external factors affecting the valuation of goodwill of a business. Internal Factors Affecting Valuation of Goodwill : (1) If risk is less in a business, then the amount of goodwill will be more than those businesses in which risks are more. (2) If quality of goods manufactured is better, there [...]