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Question: Define goodwill and discuss the accounting concepts used to determine the accounting treatment of goodwill. Compare and contrast SSAP 22 on goodwill with lAS 38 on intangibles as it relates to goodwill and critically assess these standards.
University of London Year 2014 Financial reporting 74%
Answer: Conceptually, goodwill is the difference between the value of a business as a whole and the aggregate value of its separately identifiable net assets. It arises because of economic advantages attaching to an existing business such as reputation, established market share, which form a barrier to entry to competitors who would be starting from scratch. Under IFRS3, it defines goodwill as the excess of the cost of the business combinations over the acquirer's fair value of the net assets acquired.
Goodwill can be generated from 2 sources, mainly the internally generated and externally generated. Internally generated can be understood as the internal business expenditures that cause the fair value of a firm to deviate from the fair value of its net assets. These include expenses on things such as advertising, marketing, as well as quality of its products which create a brand image. All t...(short extract)
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- Subject: Business and Management
- Course: Accountancy and Finance
- Level: Degree
- Year: 2nd/3rd
- Mark: 74%
- Words: 914
- Date submitted: February 03, 2015
- Date written: February, 2014
- References: No
- Document type: Essay*
- Essay ID: 6320
