Research And International Comparison Of Goodwill Accounting

Since 19th centry , goodwill have been one of the most difficult problems in accounting. People keep discussing about the definition, recognition and other related theories of it .But so far ,these problems still have not been solved ,and it leads the standards of each county are different and some countries'standards changed time and time again .Today,with the world integratting and the number of international corprates increacing, the goodwill from the merger and acquisition brings more and more complicated problems,which make the quality of the accounting information unreliable.So under this situation ,to study on goodwill is nessecery.This paper does a comprehensive research on goodwill's theories and makes international comparisons of its practices.First,the paper describes the definition of goodwill by expounding the development of goodwill and goodwill accounting and analyzing the"Three Theories"which are acceped widely, this paper proposes that goodwill is a special intangible asset and can definit it as a intangible resources which is belonged by someone and depends on visible and the single item intangible asset and can bring anticipated exceeding income for it.Secondly, this paper analyzs the recognition of goodwill accounting and makes international comparisions of it. The goodwill can be divided into for the internally generated goodwil and the purchased goodwill according to the way it forms. In most of the countries, the internally generated goodwil and the purchased goodwill under Pooling of Interests Method are usualy not recognized,and the purchased goodwill under Purchase Method is recognized. The influence to the purchased goodwill is different under the Pooling of Interests Method and the Purchase Method , many country have cancelled the Pooling of Interests Method but our country have not done so . This paper analyzs this stuation and gives some proposal to our country .The author holds that internally generated goodwill is relevant to users' decisions and basically in accordance with the recognition criteria put forward by FASB. Therefore, it should and could be recognized.Thirdly, this paper discusses the measurement of the goodwill .At present three methods are most popular, they are the direct method,the exceeding income method and the cutting interpolation method .Each of them has its advantage and disadvantage. The direct method is simple to caculate but does not consider the time value of cash flow. Exceeding income method is more reasonable but too complex to calculate. the cutting interpolation method is used in western countries more offen and the result comes closer to its true value but vulnerable to the effects of business negotiation skills. Therefore, this paper proposes to use the cutting interpolation method to record the goodwill and use the results of the exceeding income method as reference.Considering the stability principle ,the exceeding discount income method should be choosed at the first,and the discount period can be recived from consultation of the two sides of the mergers and acquisitions.The fourth part is about the dealing of the goodwill. This paper analyzes five methods and concluds that the devaluation test method is more consistent with the goodwill's nature. However, the amortization method is used by most countries in the world because this method is simple and easy to implementation. Many countries also realized that the impact on corporate profit is enormous after using this method , the company's international competitiveness is weaken and the difficulty of the statements is increasd. Under such circumstances, the devaluation test method of the FASB is absolutely a big step forward. The auther thinks it is breakthrough to use the devaluation test method in our country's criteria and suggests that China should enhance the quality of accountants and develop measurement methods and market to execute this mathod effectively.The fifth part is the issue of negative goodwill. It is a hot topic in recent years. The existence,the nature of negative goodwill, and how to deal with the internally generated negative goodwill and the purchased negative goodwill are all questions existing now. In this thesis, these views are an analized and the auther thinks negative goodwill exists , its nature is goodwill opposite to the postive goodwill and not to recognize the internally generated negative goodwill is reasonable because of its uniqueness. The purchased negative goodwill is caused by various factors such as poor management and the competitive disadvantage etc. . It is payment to the future profit. It should be related to the assets or asset groups according to the causes, hidden liabilities or the sharing of transaction costs . The remaining part is the core of the negative goodwill.It should offset the postive goodwill be tested with the postive goodwill.Through the research, the auther thinks that we can use an account called "goodwill" to represent the postive goodwill, the negative goodwill and the internally generated goodwill in the statement as the development of goodwill accounting. It may be negative or zero. This will be not only entitled to a clear indication of the future ability of gaining profit and also simplify the prosses of dealing this three goodwill. The initial purchased goodwill and negative goodwill in the acquisition are recognized and measured , it can be recorded in a total amount as "goodwill" (listed in the "intangibles" )together. Enterprises should disclose the goodwill and merger-related information in the interim financial statements, including purchased goodwill and negative goodwill, the amount of the purchase cost, the fair value of identifiable net assets and the basis of fair valueand and so on. The devaluation tests should be taken to the Purchased goodwill and negative goodwill in the the year of mergers and acquisition and the years after .