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Intangible assets
Goodwill
2.1 Calculation
Goodwill is the difference between the value of a business as a whole and the fair
value of its identifiable net assets.
2.2 Purchased v non-purchased
Purchased goodwill arises when an entity acquires a business and is discussed in
more detail in Chapter 17.
Non-purchased, or inherent, goodwill is not recognised within the financial
statements because it is not separable from the business.
2.3 Negative goodwill
Where an acquiring entity pays less for a business than the fair value of its separable
net assets, the negative goodwill created is immediately recognised as income in the
statement of profit or loss.
Illustrations and further practice
More detail on accounting for goodwill can be found in Chapter 17.
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