Accounting 17

1. Introduction Goodwill is an extremely interesting business phenomenon. It enables a unattackable to derive competitive advantage because of issues like reputation, stability, technical excellence, perceive quality and other intangibles, and thereby allows it to earn higher profits, than it would other have, by selling its products or assets. While the need for military rank or be of grace of God does not pinch in the normal course of a business or in its growth on a periodic basis, (because of the absence of material assets to back it up), it becomes an extremely important aspect when a political campaign business goes up for sale, or changes self-command, through mechanisms like mergers, or acquisitions. Goodwill crapper be considered from two different points of realise: an economic and an accounting approach. The economic approach regards goodwill as the present value of the additional profits the acquiring position is expecting to gain in the future resulting from the acquisition. These additional profits arise from a favorable attitude towards the firm and from synergies. From an accounting perspective, goodwill is the difference in valuation between the purchase footing and the book value of the acquired firm.

(Lycklama, 2006) The dilemma faced by accountants in valuing goodwill is best illustrated by the sign Albert Einstein had in his Princeton office that stated, Not everything that counts can be counted, and not everything that can be counted counts. (Bullen and Cafini, 2006)  Businesses with strong goodwill are valued at prices much higher than the value of their net assets, the differentials being asked and pay because of the intrinsic ability of these businesses to earn profits higher than what their assets would warrant. The accounting of goodwill thus arises at the time of change of ownership of a business, pursuant to its sale, merger or acquisition, and on a regular basis thereafter. Countries have historically followed different shipway of accounting for many... If you want to get a full essay, order it on our website: Orderessay

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