Study On Goodwill Accounting

As Knowledge Economy comes, the proportion of intangible assets is becoming larger and larger. In some companies, such as Microsoft Co., intangible assets are even gradually taking the place of tangible ones. Furthermore, goodwill, which is the most intangible, is playing a more and more important role in a company. However, because of the particularity and complexity of the goodwill itself, the questions of how to recognize, measure, record and report goodwill scientifically remain the focus and the difficulty to the study of accounting. Many scholars tried to provide their attitudes to these questions from various prospects. But the divergence may lead to the lack of unified principles that guide accounting practices. In particular, in the last few years, the purchase and incorporation of companies become widespread, so the issues about goodwill have to be confronted by the accountants in our country. Under such circumstances, it is important for guiding and standardizing accounting practices to further the study of goodwill accounting theory.The thesis can be divided into nine sections.The first section is the introduction. In this section, the author reports firstly the reasons to the selection of this subject, then the research achievements home and abroad, and finally the methodology and technique.The second section concerns the background of goodwill accounting. In this section, the author considers the Knowledge Economy as the social circumstance of the research and the intangible assets theory as the theory foundation on which goodwill accounting rests. The third section concerns the basic definitions about goodwill. In this section, the author firstly describes the process in which the accounting scholars are gradually familiar with the term of goodwill, and then develops a new definition for goodwill from accounting aspect based on the argument about excess earnings concept, intangible resource concept and mastervaluation account concept. Goodwill refers to all unrecognized intangible resources owned and controlled by a company, which can bring extra profits for the company. Lastly, elements and characteristics of goodwill are discussed and analyzed. The author thinks excellent management structure is the essence of goodwill. The fourth section concerns the recognition of goodwill. The author introduces firstly the common accounting recognition criteria, and then holds that internally generated goodwill should be recognized from the aspects of accounting target, accounting recognition criteria and accounting principles, finally studies the recognition of purchased goodwill according to the common accounting recognition criteria and discusses the problem of purchased goodwill under different incorporation ways and different incorporation accounting treatment method.The fifth section concerns the measurement of goodwill. The author introduces at first the measurement theory, and then analyzes the direct and indirect ways in which goodwill can be measured with the help of the theory and method of intangible assets estimate. In the direct way the goodwill can be calculated with the multiplication value, capitalization value or the discount value of a company's future extra profit. And in the indirect way goodwill can be measured as the excess of the value of the whole company over the fair value of net assets.The sixth section concerns the accounting treatment of goodwill. The author argues the traditional accounting treatments of the purchased goodwill, and then puts forward how to deal with internally generated goodwill on the base of the latest goodwill accounting treatments in Britain and the US, and finally demonstrates the process of goodwill accounting treatment with the help of a example. The seventh section concerns the disclosure of goodwill accounting information. The author discusses how to disclose goodwill accounting information by the means of financial statements. The eighth section concerns the negative goodwill. The author discusses primaril...