Goodwill Accounting Term

Goodwill Accounting Term

See Also:
Accounting Income vs Economic Income
Depreciation
Cash Flow Statement
Income Statement
Generally Accepted Accounting Principles

Goodwill Accounting Term

The goodwill accounting term is an intangible asset. It represents non-physical assets, such as brand name and reputation, and shows up on the asset side of a company’s balance sheet.
A company often acquires goodwill by purchasing another company. For example, company A is going to purchase company B. Company B has net tangible assets of $8 million. But company A will pay $10 million to acquire company B. Company A is willing to pay a premium because of company B’s good reputation. The residual, $2 million, is goodwill, and it shows up on company A’s balance sheet as an intangible asset. So, in the case of an acquisition, calculate it using the following formula:
Goodwill = Purchase Price – Net Assets
According to a recent accounting regulation, FASB 142, this accounting term is no longer amortized. Instead, its value can be adjusted periodically for impairment.

Goodwill Accounts

Goodwill accounts show up on the assets side of a company’s balance sheet. The account represents intangible assets, such as a company’s brand name or reputation, that have value but are not physical assets.

Goodwill and Business Valuation

Now, let’s look at goodwill and business valuation. When a business valuation is performed, it can be tricky to accurately value intangible assets such as goodwill and its impairment. When a valuation becomes complex, it is standard practice to consult with a valuation firm. Need help finding one? We will get you connected with one of our strategic partners for your valuation needs. To get connected, fill out the following form.

We will receive your information between 9-5 Monday through Friday. You can expect to hear back within 24 hours. We only use your information to contact you for the desired help.

[gravityform id=”18″ name=”Danto Contact Form” title=”false”]

goodwill and business valuation, Goodwill Accounts, Goodwill Accounting Term

[box]Strategic CFO Lab Member Extra

Access your Exit Strategy Execution Plan in SCFO Lab. This tool enables you to maximize potential value before you exit.

Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
goodwill and business valuation, Goodwill Accounts, Goodwill Accounting Term
 

ARTICLES YOU MIGHT LIKE

Does your Accounting Department Produce Net Income?

Coaching the Entrepreneur: Learn how to know what you don’t know. How much should I spend on accounting for my company?     I have been in the accounting profession for 32 years, and for the last 6 years, I’ve owned my own consulting firm to assist companies with accounting challenges. There is one common theme that I

Read More »

Is Mexico the New China?

In the wake of the COVID-19 pandemic and escalating tensions with China, American companies are actively seeking alternatives to mitigate their supply chain risks and reduce dependence on Chinese manufacturing. Nearshoring, the process of relocating operations closer to home, has emerged as an explosive opportunity for American and Mexican companies to collaborate like never before.

Read More »

JOIN OUR NEXT SERIES

Financial Leadership Workshop

MARCH 28TH-31ST 2022

THE ART OF THE CFO®

Financial Leadership Workshop

Days
Hours
Min

August 7-10th, 2023

SHARE THIS ARTICLE
WIKI CFO® - Browse hundreds of articles
Skip to content