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Goodwill Calculation

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  • 28-04-2013 7:18pm
    #1
    c.k28
    Registered Users Posts: 11 ✭


    When you are calculating goodwill in a business combination, how come sometimes you include share premium, share capital, retained earnings and sometimes you don't?


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    #2
    myshirt
    Registered Users Posts: 5,245 ✭✭✭myshirt


    c.k28 wrote: »
    When you are calculating goodwill in a business combination, how come sometimes you include share premium, share capital, retained earnings and sometimes you don't?

    When do you not include these items?

    The basics of a goodwill calculation is that you establish

    1. What you paid,

    as against

    2. The fair value of the net assets/equity acquired


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    #3
    masoodsarwar
    Registered Users Posts: 152 ✭✭masoodsarwar


    c.k28 wrote: »
    When you are calculating goodwill in a business combination, how come sometimes you include share premium, share capital, retained earnings and sometimes you don't?

    If u r not given the FV or BV of net assets.

    you need to calculate it

    as Net assets= Total assets- Total Liabilites or alternatively
    you can just add Share capital+ share premium/other reserves+ Pre acq. retained earning.

    and then goodwill is difference between what u got and what u paid for.


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    #4
    c.k28
    Registered Users Posts: 11 ✭c.k28


    Thank you :) It makes sense to me now :)


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