Goodwill

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.

"Gregory L. Hansen" wrote

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.

On Tue, 9 Aug 2005 15:21:22 +0000 (UTC), in alt.accounting snipped-for-privacy@steel.ucs.indiana.edu (Gregory L. Hansen) wrote in :

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.

Ah, yes. Thanks.

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.

On Tue, 9 Aug 2005 17:05:17 +0000 (UTC), in alt.accounting snipped-for-privacy@steel.ucs.indiana.edu (Gregory L. Hansen) wrote in :

That is why you can only book goodwill during the purchase of a business or operational parts of a business.

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.

Also, I believe you almost always ONLY see it on consolidated statements?