Goodwill

accounting

Goodwill, known as goodwill in English, is an indefinite intangible asset capable of generating future benefits for a company and corresponding to its brand value (prestige, recognition, customers, employee relations, know-how, etc.) .

It is said that a company can be worth more than the algebraic sum of all the elements that make up its assets. Goodwill collects this additional value.

The value of goodwill is inherent in a company, but it arises and is accounted for only after the acquisition of a company. It is calculated as the excess of the price paid by the company over the value of the equity. For example, if all the assets of a company are worth 100 million euros, but the company is bought for 110 million, the goodwill is worth 10 million euros (110 - 100).

Amortization of goodwill or goodwill

In accounting, goodwill is a non-depreciable asset, a mandatory procedure is established that consists of determining whether it has suffered any loss of value. However, in some countries laws are being changed so that goodwill is amortizable.

In Spain, the new auditing law in place since June 2015, establishes that the goodwill, in accounting terms, will be amortized over a period of ten years, unless the contrary is proven. In that case, it could not be amortized and continue with the impairment calculation. Fiscally, a maximum of one twentieth part (5%) will be amortized.

Goodwill example

A clear example to explain goodwill is the case of Coca-Cola, it would not be so successful if it were not for the high value obtained through its brand recognition, created through decades of work and marketing. Although brand prestige is an intangible asset that cannot be seen or touched, its positive effects on profits demonstrate how valuable goodwill is to the company.

Tags:  other Argentina passes 

Interesting Articles

add