Goodwill

  • Thread starter Gregory L. Hansen
  • Start date

G

Gregory L. Hansen

I've paged through books that intersect accounting, and one thing that
appears on the balance sheets is goodwill.

How the heck can you put a number to that and call it part of your net
worth?
 
Ad

Advertisements

L

L S Lyons

09/08/2005 16:56:47
I've paged through books that intersect accounting, and one thing that
appears on the balance sheets is goodwill.

How the heck can you put a number to that and call it part of your net
worth?
Here is a definition you won't find in the text books:
Goodwill -- a number added to the accounts by management to prevent
them getting lynched by the shareholders.
Hope this helps.
 
P

Paul A Thomas

Gregory L. Hansen said:
I've paged through books that intersect accounting, and one
thing that appears on the balance sheets is goodwill.

How the heck can you put a number to that and call it part
of your net worth?


You don't book self-created goodwill.

You do however, book purchased goodwill. That being the amount above the
fair values of the various tangible assets that you bought.
 
D

David Jensen

I've paged through books that intersect accounting, and one thing that
appears on the balance sheets is goodwill.

How the heck can you put a number to that and call it part of your net
worth?
FASB had that question as well.

Right now, goodwill is quite limited in application. Generally, the only
time you can recognize goodwill is when you buy an ongoing business for
more than the value of its physical assets. This assumes that you will
continue to make superior profits because you bought an ongoing
business. If you can no longer make those superior profits, you must
impair the goodwill (an expense) to match the level of profitability
that you received. Once you have impaired goodwill, you cannot undo it.
 
G

Gregory L. Hansen

09/08/2005 16:56:47


Here is a definition you won't find in the text books:
Goodwill -- a number added to the accounts by management to prevent
them getting lynched by the shareholders.
Hope this helps.
Ah, yes. Thanks.
 
G

Gregory L. Hansen

FASB had that question as well.

Right now, goodwill is quite limited in application. Generally, the only
time you can recognize goodwill is when you buy an ongoing business for
more than the value of its physical assets. This assumes that you will
continue to make superior profits because you bought an ongoing
business. If you can no longer make those superior profits, you must
impair the goodwill (an expense) to match the level of profitability
that you received. Once you have impaired goodwill, you cannot undo it.
I imagined something like name recognition. E.g. if Greg Cola was
released to stores and tasted exactly like Coca Cola, and ignoring the
obvious intellectual property issues, people would still buy more Coca
Cola. But that didn't seem very goodwilly, and seemed hard to quantify.
 
Ad

Advertisements

D

David Jensen

I imagined something like name recognition. E.g. if Greg Cola was
released to stores and tasted exactly like Coca Cola, and ignoring the
obvious intellectual property issues, people would still buy more Coca
Cola. But that didn't seem very goodwilly, and seemed hard to quantify.
That is why you can only book goodwill during the purchase of a business
or operational parts of a business.
 
X

xyzer

Gregory said:
I've paged through books that intersect accounting, and one thing that
appears on the balance sheets is goodwill.

How the heck can you put a number to that and call it part of your net
worth?
Goodwill is the amount one pays for an entity above and beyond the
amount of the fair market values of the entity's certain
recordable/recorded assets. Of course, recordable/recorded assets in
the accounting sense almost never give a complete picture of the
business, in terms of being able to approximate halfway reasonably its
worth. But, of course, you already knew that accounting data is not
really even close to all that matters in evaluating a business. It's
necessary of course, but it by itself doesn't really come close to
telling one all he needs to know in order to approximate worth.
 
Ad

Advertisements

H

Holly J. Sommer

David Jensen said:
That is why you can only book goodwill during the purchase of a business
or operational parts of a business.
Also, I believe you almost always ONLY see it on consolidated statements?
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads

Goodwill 2
USA Goodwill 1
Goodwill question 8
Goodwill entry 3
UK goodwill and drawings? 0
Sale of goodwill 0
USA Goodwill in GAAP 1
Impairment of Goodwill 2

Top