|When will we need to value or evaluate goodwill?As goodwill is an intangible asset (invisible and not physical asset), hence it is generally not valued in the books of account of a business.
Situations where goodwill valuation re necessary:
Salient point on accounting for goodwill:
(a) Goodwill after being valued needs to be credited to the former owner (s) before the change in ownership
(b) Once goodwill which was previously not recorded in the book now been taken up into the books of accounts will affect the NET WORTH of a business
(c) Any gain derives from valuation of goodwill needs to be adjusted to the Capital Accounts of the original owner(s).
( see article on basic bookkeeping treatment or double entry of goodwill)
January 8th, 2011 Comments off
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