Calculate goodwill
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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 l.jpg

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 l.jpg

    Step 3

    Calculate Goodwill

    We calculated this in Step 2

    We calculated this in Step1


    Calculate goodwill3 l.jpg

    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


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