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Effect of Proposed Dividend in valuation of Goodwill

Himanshu (Article Trainee) (97 Points)

17 February 2020

In valuation of goodwill,
Proposed dividend to equity & preference shares is to be deducted from assets or not ?

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3 Replies

ACCOUNTANT (Student) (559 Points)
Replied 17 February 2020

Pre acquisition dividend is deducted from the Cost of Investment to calculate Goodwill or capital reserve.....Proposed dividend need not be made for any kind of adjustment in calculating goodwill....

Himanshu (Article Trainee) (97 Points)
Replied 17 February 2020

Thanks for reply, but I think you have given answer from consolidation point of view and I have confusion from valuation point of view, i.e. valuation of Goodwill...

ACCOUNTANT (Student) (559 Points)
Replied 22 February 2020

Dividend declared is not to be treated as an outside liability(I mean it is liability towards owners/shareholders).., so it need not be deducted in calculating goodwill...,However., if you are deducting Preference share capital., you need to deduct preference dividend also...