Goodwill calculation
apoorv (no) (24 Points)
08 June 2015
What is the best method of calculation of goodwill amongst average profit, super profit, annuit and capitalisation method and why?
SHINY
(CA Final Student)
(699 Points)
Replied 12 June 2015
To calculate the Goodwill, 'Super Profit method' is the best one because it reflects the extra profits that you are going to earn over and above the normal profits earned by that particular industry by paying the Goodwill amt to the seller of say the business/profession he is going to sell to u.
For caln of Goodwill by Super Profit Method, you require :
FMP-Future Maintainable Profits
Avg Capital employed
NRR-Normal Rate of Return
NYP-Number of Years purchase
Formula being :
Goodwill=(FMP-Avg Capital Employed*NRR)*NYP
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