On Goodwill And Goodwill Accounting

This paper expounds the advent and development of goodwill and goodwill accounting, as well as the process in which people how to recognize goodwill. Meanwhile, the paper concludes representative "Three Theories", i.e, super income theory, surplus theory, and intangible asset theory. According to these three theories, the paper also points out how to define the concept of good will respectively.For better analyzing and discussing challenges faced by goodwill accounting, the paper firstly analyses difficulties suffered by intangible asset accounting. In particular, the paper introduces difficulties involved in enterprise brand asset, R&D, and human resources, which are related to goodwill and goodwill accounting directly or indirectly. Next, the paper deeply discusses problem for confirmation and calculation arising from intangible asset accounting on knowledge economy condition. The paper also proposes that existing calculation approaches to intelligent resources and cost of intelligent products should be changed thoroughly. Moreover, the paper simply discusses problems concerning intangible asset amortization and information disclosure. According to specific conditions in China, the paper analyses in detail relevant contents comprised in china accounting principles-intangible asset, referring to international accounting principles. Preliminary discussions on tax related problems of intangible asset are also made in this paper.As for difficulties faced by goodwill accounting , the paper describes from the definition of goodwill, combines all well-known viewpoints, then summarizes the most representative expressions. The paper points out that the essential element of goodwill is outstanding management talents of enterprise, through which people can better explain three different views on the nature of goodwill. As for core goodwill, the paper introduces its background and discusses problems for its conformation. Generally speaking, commonly used goodwill is referred to as bought out goodwill. Therefore, the paper firstly re-comprehends the definition of asset. As far as self-created goodwill is concerned, the paper analyses the confirmation approaches to the part that can be confirmed, and gives a negative view to integrally confirming self-created goodwill. And then, the formation, the different forms in accounting circles andthe composition of bought out good will are discussed and analyzed. The concept of good will related to current accounting theory and principles, as well as its relationship and differences from the operational contents in practical accounting, is pointed out. Furthermore, the paper analyses the existing problems for the confirmed good will in practical accounting. As for the calculation of good will, on the basis of the general methods of intangible asset calculation, two methods are introduced, i.e., indirect method and direct method. After considering the interrelations and differences between the two methods, the author extends his own assessment and choice. That is, when doing the calculations of good will, the direct method is primary, and the indirect is supplementary. In this paper, there are also some other related topics being discussed and probed into, such as amortization of goodwill, depreciation of goodwill, revaluation of good will, and negative good will. Finally, the paper prescribes the preliminary outlook to the future development of goodwill accounting, pointing out the possibility of self-created goodwill entering into financial accounting system and the feasibility of goodwill exposure taken into account in multi-level financial report, while letting the respective owner's equity of confirmed goodwill be open to discuss.