The Essence Exploring And Accounting Prospect For Goodwill

All the problems concerning goodwill accounting arose from the identification of goodwill. Goodwill is always divided into internally generated goodwill and purchased goodwill. It is universal practice not to recognize internally generated goodwill, only purchased goodwill is accounted. Merger and combination became the basis of the development of FAS concerning goodwill. All FAS concerning goodwill were set up for purchased goodwill, it is a result of the restriction from economic environment and accounting measures. Among the theoretic field and practice field, the mixed expression of "goodwill" and "purchased goodwill" has made a fraud exchange of the conceptions. However, after identification, no matter what accounting method used for measurement afterwards, none can justify itself. The contradiction caused our great interest in tracing to the source of goodwill conception and its accounting theories. Is there misunderstanding concealed from the very beginning? Is purchased goodwill objectively existing or not? Should internally generated goodwill be recognized? And how to recognize?This thesis is aimed to explore the core character of goodwill, and make a tentative prospect for goodwill accounting after we have a clear understanding of goodwill essence. Our discussion is made in four sections.In the first section, Literature review looks back and comments on the development of theories and practice in goodwill accounting. The FAS concerning goodwill changes on the basis of economic impact of goodwill accounting, but not on the basis of goodwill essence. As essence is abandoned, there are contradictions and bottlenecks all along the changes. Further, we discussed the misunderstanding of goodwill concepts and goodwill accounting.In the second section, we reveal the misunderstanding of "purchased goodwill". According to the analysis in FASB's 1999 Exposure Draft, we find there are conflicts between the concept and the value theory on which it has been relied. Thus accounting for "purchased goodwill" is destined to fall into awkward straits. We think goodwill is changeable and can't be transferred. Objectively speaking, goodwill can't be purchased.In the third section, we give a perspective at the essence of goodwill. Taking Marshall's economic value theory as the point of view, we infer that goodwill is internally generated. Moreover, we divided internally generated goodwill into "periphery goodwill" and "core goodwill". The cooperate effects of financial capital and human resource capital engender and condense the surplus value, which is the resource of core goodwill, while the result of core goodwill is the enterprise's sustaining superior earnings.In the last section, based on the discussion of goodwill essence, we make a prospect on accounting for goodwill. We emphasized on the accounting for "core goodwill". Our opinion is "periphery goodwill" can be transformed into the accounting for other intangible assets, while "core goodwill" should be evaluated. Even more, we consider the way of evaluating core goodwill as "determine naturefirst, fix quantity later."...