New Opinions Of Goodwill Accounting

Now in our country , goodwill accounting theory need to be consummated . And it is necessary that goodwill accounting standards should be revised in order to improve accounting information . So I bring forward my opinions about many questions of goodwill accounting .1 . Concept of goodwillGoodwill fall into positive goodwill and negative goodwill , let us analyze conception of positive goodwill first . I think that , if we want to bring forward new conception of positive goodwill , we must summarize characters of it . I think characters of positive goodwill are as below : (1) Positive goodwill is an intangible asset . (2) In general , if positive goodwill is owned by a company , it often brings extra profit to the company . (3) Positive goodwill is in relation to entity of a company and it is indecipherable . (4) To a certain degree , change of value of positive goodwill is complex and accidental , and cost of positive goodwill is not proportional to value of positive goodwill . Contacting the third item , we can see that , if we regard positive goodwill as intangible assets , it is special one . I put forward a new concept of positive goodwill after summarizing characters of it : Positive goodwill is a special intangible indecipherable assets which can bring extra profit to a company , and it is relation to entity of a company and is indecipherable . By contrast , concept of negative goodwill is as below : Negative goodwill is a special indecipherable liability which can reduce profit of a company , and it is relation to entity of a company and is indecipherable .2 . Source of goodwill and evaluation of itAbout the source of goodwill , many experts make a study , and put forward their opinions . In those opinions , opinions whose influence is more extensive can fall into two kinds : opinion of single factor source . opinion of many factors source . Representation of opinion of single factor source is Yuedong. Dong in Shanghai Finance College , who argues that goodwill comes from the use of human resources in production process . Opinion of many factors source points out that goodwill comes from superior geographical position , good reputation of company , extensive social relations , excellent management team , excellent employees , and so on . I think that both the opinions above have objections . In such a situation , I put forward a new opinion about source of goodwill : Goodwill comes from the use of human resources and relation resources in production process . The relations above are the configuration relations among human resources , cash and other assets . If a company owns excellent human resources and relation resources , it will increase payoff oftangible assets and intangible decipherable assets in a company . The company will have excess profits . so positive goodwill is generated . On the contrary , If a company owns poor quality human resources and relation resources , it will reduce payoff of tangible assets and intangible indecipherable assets in a company , the profits will go down , so negative goodwill is generated . Theoretically , value of goodwill can be expressed in formulas below : Value of positive goodwill = total utility of human resources and relation resources - total cost of human resources and relation resources - mean total utility of human resources and relation resources in a trade , Value of negative goodwill = mean total utility of human resources and relation resources in a trade - (total utility of human resources and relation resources - total cost of human resources and relation resources)mean total utility of human resources and relation resources in a trade . But it is unable to determine value of goodwill in formulas above in practice , because human resources and relatiton resources are special resources in a company . Not only is their cost difficult to be determined , but also their yield is difficult to be estimated . So I assert that we can only use traditional income approach or difference approach .3 . Goodwill bookkeepingAbout goodwill bookkeeping , my opinions include mainly points below : First , generated internally goodwill of a company should be charged up in order to avoid distorting accounting information . Second , because change of goodwill value is not proportional to time or using time , generated internally goodwill and purchase goodwill should not be amortized to loss or profit . Value of goodwill must be evaluated regularly , and the record of account, should be adjusted according to assets evaluation . Third , purchase goodwill should be shifted to generated internally goodwill after purchased company is reformed by purchasing company .