July 27th, 2007
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This article deals with how goodwill normally arises and what does goodwill means.
Goodwill normally arises : |
When a partnership admits a new partner, two important things are considered:
- Profit adjustment whether in terms of existing and future profits and
Also, besides new partner(s) being admitted, the death or retirement of an old partner also needs the computation or valuation of goodwill of the partnership. |
Simple Definitions of Goodwill: |
- “ as the cost of acquisition less the aggregate fair value of the purchased assets and liabilities”
- In simple everyday terms, the advantage a business has in its connection with its customers. Why is this so? The goodwill of a business may be due to the following:
- Location of the business
- Nature and reputation of its products and services
- Its trademarks, patents and / logo
- Professional high quality skillful management and or labor
- Having advantage like difficult entry into the industry or freedom from legislative restrictions ( casino,etc)
- Possession of partial or complete monopoly.
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