Chapter 31 (contents of published accounts)

Question 1

what is goodwill?

Answer 1

Goodwill arises when a business is valued at or sold for more than the balance sheet value of its assets.

Example of Goodwill:
If business A buys out business B for $2m, yet the net asset value of B is only $1.5m, then A has paid $0.5m for the ‘goodwill’ of business B.