Goodwill

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 I wanted to know,

1) what is the treatment of goodwill, when goodwill has been recorded in the books, where some consideration in money or money's worth has been paid.

2) why it is important to see that, the amount paid to vendors, not presented by tangible assets has been debited to goodwill

3) And, why it is said that, it is not prudent that, goodwill shown in the company's a/c by way of writing up the value of its assets, on revaluation or writing back the amount of goodwill earlier written off by the company.

Expert's opinion requested.

Thank you.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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23 September 2011 Why goodwill is required to be valued?
It is because the number of days the firm is doing business and accordingly the sales is also increasing the suppliers also grant more number of days credit and hence the firm generated its reputation which allows it to create goodwill. When a new partner enters the business he gets the cocked food and he need not plant a tree but he is to just pluck the fruits. To do so some const has to be incurred or the incoming partner has to wait for the number of years to generate such a reputation. Hence, it is measured in terms of money bases on various method.

The same principal applied in the cased of company

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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29 September 2011 In case 1 entry be

Goodwill A/c DR
To Bank/ Other Asset given

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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29 September 2011 as it is a purchased goodwill and if the consideration paid to the vendor is supported by the assets thenno question of goosdwill arise

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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29 September 2011 the above case is because if it supported by the assets then it is basically a purchase of assets and no payment of goodwill

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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29 September 2011 suppose u r purchasing the net assets of a business man worth Rs 900 for Rs 1000, then in such case Rs 100 payment is not supported by asset then it is the payment towarsd the goodwill

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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29 September 2011 but if in the above case u forget to include one asset worth Rs 100 and booking asset worth only Rs 900 and Rs 100 as goodwll whereas it was purchase pricer of aset which you forget to include in the list

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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29 September 2011 well only purchased goodwill is allowed to be recorded as per AS 26 Intangible assets and no upward revaluation is possible as per AS 26 because no amount has been paid by the compny is acquiring that goodwill

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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29 September 2011 i hope u r clear with above explanations if you are having any doubt plz contact

Querist : Anonymous

Querist : Anonymous (Querist)

29 September 2011 nw i got d point.
thanks..

i hv posted another query regarding gratuity.
it has past 3-4 days, bt nobody answered d same.
Sir, hope u can help m for that also.

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