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Step 3. Calculate Goodwill. To calculate goodwill, we compare Cost of Acquisition (from Step 2) with Fair Value of Identifiable Net Assets Acquired (from Step 1) If COA > FV of INA We must recognise Goodwill. If COA < FV of INA, we will recognise an item of Revenue, known as Excess.

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Calculate Goodwill


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Presentation Transcript
calculate goodwill

Step 3

Calculate Goodwill

To calculate goodwill, we compare

  • Cost of Acquisition (from Step 2) with
      • Fair Value of Identifiable Net Assets Acquired (from Step 1)

If COA > FV of INA

  • We must recognise Goodwill

If COA < FV of INA, we will recognise an item of Revenue, known as Excess

calculate goodwill2

Step 3

Calculate Goodwill

We calculated this in Step 2

We calculated this in Step1

calculate goodwill3

Step 3

Calculate Goodwill

Click on the mouse to find out

What does goodwill represent?

When Burgers Ltd acquires Pizza Ltd, it may also acquire

  • Loyal customers of Pizza Ltd
  • Experienced Staff of Pizza Ltd

In addition, it may experience benefits relating to economies of scale.

End Step 3