{"id":2892,"date":"2017-04-21T12:26:04","date_gmt":"2017-04-21T12:26:04","guid":{"rendered":"https:\/\/techfeatured.com\/automotive\/12892\/accounting-a-brief-introduction-to-goodwill"},"modified":"2017-04-21T12:26:04","modified_gmt":"2017-04-21T12:26:04","slug":"accounting-a-brief-introduction-to-goodwill","status":"publish","type":"post","link":"https:\/\/techfeatured.com\/automotive\/12892\/accounting-a-brief-introduction-to-goodwill","title":{"rendered":"Accounting &#8211; A Brief Introduction to Goodwill"},"content":{"rendered":"<p><em>Goodwill<\/em> is the term used to describe the <em>&#8216;good name&#8217;<\/em> or <em>&#8216;reputation&#8217;<\/em> earned by a firm as it trades. If a business provides a good service to its customers, it is hoped that they will come back again and again to you the services\u00a0of that firm. This in turn will hopefully have a positive impact on the future turnover and profits of the business. In accounting terms goodwill represents an asset to the business and has a real monetary value.<\/p>\n<p>The main characteristics of goodwill are:<br \/>\n<\/p>\n<ul>\n<li>It belongs to the category of intangible assets which includes other items such as patents, trademarks and copyrights. Goodwill\u00a0along with\u00a0these other <em>intangibles<\/em> are non-physical, fixed assets and are included\u00a0on the balance sheet.<\/li>\n<li>It is a valuable asset.<\/li>\n<li>It contributes\u00a0to the\u00a0earning of excess profits. The existence of goodwill is often key\u00a0to a business earning profits over and above the\u00a0levels for similar businesses in the same\u00a0industry.<\/li>\n<li>Its value is liable to constant fluctuations.\u00a0<\/li>\n<li>Its value is only realised when a business is sold or transferred.<\/li>\n<li>It is difficult to place an exact value on goodwill and it\u00a0will always\u00a0involve\u00a0expert judgement.<\/li>\n<\/ul>\n<p>The\u00a0key factors affecting goodwill are:<br \/>\n<\/p>\n<ul>\n<li>The nature of the business. The\u00a0goodwill relating to a service based business is likely to be different\u00a0than that of a manufacturing business.<\/li>\n<li>Favourable location. If a business is situated in a good location\u00a0it will generally have a positive affect on the value of goodwill.<\/li>\n<li>Longevity of the business. If a business has been trading for a long period it may have had more time to\u00a0develop a good solid reputation, and more goodwill.<\/li>\n<li>Possession of licenses or technical know- how.<\/li>\n<li>After sales services and general customer care.<\/li>\n<li>Business risk involved.<\/li>\n<li>Future competition and new entrants into a specific business marketplace.<\/li>\n<li>Management&#8217;s attitude towards the fulfilment of commitments<\/li>\n<\/ul>\n<p>Specific circumstances when there is a need for the <em>valuation<\/em> of goodwill:<br \/>\n<\/p>\n<ul>\n<li>When there is a change in the profit-sharing ratio amongst the existing partners.<\/li>\n<li>When a new partner is admitted.<\/li>\n<li>When a partner retires.<\/li>\n<li>When a partner dies.<\/li>\n<li>When the business is sold as a going concern.<\/li>\n<li>When the business is amalgamated with another firm.<\/li>\n<\/ul>\n<p>Goodwill, although not something that can necessarily be shown in black and white, is a vital component of a business&#8217;\u00a0worth and whether looking to acquire or sell an established firm it is important not to underrate its\u00a0value.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Goodwill is the term used to describe the &#8216;good name&#8217; or &#8216;reputation&#8217; earned by a firm as it trades. If a business provides a good service to its customers, it is hoped that they will come back again and again to you the services\u00a0of that firm. This in turn will hopefully have a positive impact [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2],"tags":[3710,540],"_links":{"self":[{"href":"https:\/\/techfeatured.com\/automotive\/wp-json\/wp\/v2\/posts\/2892"}],"collection":[{"href":"https:\/\/techfeatured.com\/automotive\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/techfeatured.com\/automotive\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/techfeatured.com\/automotive\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/techfeatured.com\/automotive\/wp-json\/wp\/v2\/comments?post=2892"}],"version-history":[{"count":0,"href":"https:\/\/techfeatured.com\/automotive\/wp-json\/wp\/v2\/posts\/2892\/revisions"}],"wp:attachment":[{"href":"https:\/\/techfeatured.com\/automotive\/wp-json\/wp\/v2\/media?parent=2892"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/techfeatured.com\/automotive\/wp-json\/wp\/v2\/categories?post=2892"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/techfeatured.com\/automotive\/wp-json\/wp\/v2\/tags?post=2892"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}