FASB Definition Of Goodwill Essay

eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount

Assets are to be recorded and valued based of the type of asset there are.

4. Availability of technical, financial, and other resources needed to complete it, and to use or sell it 5. The way in which the future economic benefits will be generated; including the existence of a market for the asset if it will be sold, or its usefulness to the entity if it will be used internally

The current assets are those which are readily convertible into cash and cash equivalents due to their highly liquid nature and also form part of working capital of the company’s operations. However, the long term assets in contrast are not liquid because since they have a useful life of more than a year and hence their full value cannot be easily realized within

Goodwill is a premium that the acquiring company pays above the fair value of all net assets of the acquired company, which represents an extra value attributed to brand and reputation of the acquired company. Accounting treatment for goodwill has evolved significantly as goodwill becomes an increasingly important economic resource for many companies.

The propose of this is to have an understanding of how Goodwill works under different circumstances. Small companies handle goodwill differently compared to how bigger companies would .In the case of the AOL Time Warner merger,it never became a high-value transaction as it was anticipated to be. To prevent this from happening again, for companies it would mean that companies must further investigate and run tests to determine it the goodwill is really what it out to be.

Step 2. As of the acquisition date, intangible assets and liabilities need to be measured at their fair market value. At this point, various items may not be recorded on the balance sheet, thus it may cause the task of measuring intangible assets and liabilities to be difficult for the owner. In addition, some intangibles cannot be recognized as assets under Generally Accepted Accounting Principles (GAAP).

Intangible assets are considered assets without a physical form, a company’s reputation, a business industry knowledge and name recognition (Francis, n.d.). Intangible assets provides intrinsic value that adds to a business reputation and credibility. Companies like Apple and Samsung has a reputation of being the most innovative companies in their field of mobile technology and electronics. Having the ability to be considered one of the best adds to a company’s longevity. Some companies reputations are tainted or takes a hit, this may cause them to have to liquidate tangible assets just to survive. Intangible assets will not show up on balance sheets or income statements but they are valuable to keeping a company in good standing and may be the key to survival in a competitive market. Intellectual property can be considered a varication of an intangible assets, intellectual property refers to patents, brands (Pepsi, Ford), logos, inventions, trademarks and other creative communications (Francis, n.d.). We live in a world where brand names is wanted and sometimes may feel like they are needed. For example, Jordan name branded

The intangible asset is controlled by the organization. This means the organization has the power to obtain future economic benefits from the asset.

The method of this paper consists of discussing the three criteria which are used to assess the alternatives to accounting IA: valuation, recognition and presentation. Each of these criteria is measured on a scale from 0 to 100 (alternatively, from 0.0 to 1.0) to show the extent of the departure of the alternative from the currently accepted method, usually the Generally Accepted Accounting Principles. Because Goodwill is already an established IA under current accounting rules, it will be discussed first (for each criteria) to show the extent of the existing treatment. Although other IA such as Human Capital or

(Add sentence about attributing a monetary value to goodwill.) In subsequent years, any amount of goodwill determined from this fair value calculation needs to be tested for impairment.

The advantages and disadvantages of market value for liabilities are the same as those for assets. Such a measurement basis may be appropriate, for example, where the liability is attributable to

In addition these assets provide an insight into an entity's future prospects. However, current Canadian and US accounting practice limits recognition of self developed intangibles in order to enhance reliability in financial reporting. Fundamentally, the nature of these limitations prevents management bias and inhibits unjustifiable flexibility of statement presentation.

2. Cost Method: Expenses are the cost of unsold products and are reported as assets. These expenses include wages, electricity in offices outside of the factory (sales and marketing, general administrative offices) are reported immediately as expenses in the accounting period that they are used cost outside of the factory do not

As Lucy and Gemma start there new partnership agreement from Lucy’s old business called ‘Lucy’s Catering and combine their assets and liabilities to form a new partnership called ‘Awesome Catering’, Lucy’s old business, ‘Lucy’s Catering’ will have Goodwill as an asset. Goodwill is the monetary value given to the reputation or customer loyalty of Lucy’s old catering business, Lucy’s Catering and is an intangible asset contributing to catering sales. During the formation of Lucy’s catering where assets and liabilities are joined with the assets and liabilities of Gemma, the goodwill