The goodwill measures the capacity of a business to obtain profits over the market or sector medium profitability. It is par excellence the most analysed intangible asset and it is normally calculated under two points of view:
- The appreciation of the synergic value of all the elements an on-going business or activity.
- The over price a third party would be willing to pay for the acquisition of an on-going activity or business.
When the group of elements that form that over price are not separable, they are referred as Goodwill. It aggregates the immaterial value that represents a client portfolio, prestige, efficiency, organisation or experience.
Thus, it is a very important asset when considering acquisitions or investments in companies, it can be recorded in the balance sheet (only when it has been acquired to a third party) and can be subject to impairment tests for its correct accountability.
From a deeper accounting point of view, its calculation is a business combination described in the IFRS 3, which translates to a global service known as Purchase Price Allocation (PPA)
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