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    Types of Goodwill

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    Jann Vic Sales
    There are two types of goodwill: institutional goodwill, which remains with the business without a specific owner, and professional goodwill, which is attributable to an owner's efforts or reputation. The key difference is whether goodwill transfers without a non-competition agreement. Goodwill is calculated by deducting the fair market value of a company's identifiable assets and liabilities from the purchase price. For example, if Company A pays more than Company B's net assets, the excess amount is considered goodwill.

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    Types of Goodwill

    Uploaded by

    Jann Vic Sales
    33 views1 page
    There are two types of goodwill: institutional goodwill, which remains with the business without a specific owner, and professional goodwill, which is attributable to an owner's efforts or reputation. The key difference is whether goodwill transfers without a non-competition agreement. Goodwill is calculated by deducting the fair market value of a company's identifiable assets and liabilities from the purchase price. For example, if Company A pays more than Company B's net assets, the excess amount is considered goodwill.

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    Types of goodwill

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    There are two types of goodwill: institutional goodwill, which remains with the business without a specific owner, and professional goodwill, which is attributable to an owner's efforts or reputation. The key difference is whether goodwill transfers without a non-competition agreement. Goodwill is calculated by deducting the fair market value of a company's identifiable assets and liabilities from the purchase price. For example, if Company A pays more than Company B's net assets, the excess amount is considered goodwill.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    33 views1 page

    Types of Goodwill

    Uploaded by

    Jann Vic Sales
    There are two types of goodwill: institutional goodwill, which remains with the business without a specific owner, and professional goodwill, which is attributable to an owner's efforts or reputation. The key difference is whether goodwill transfers without a non-competition agreement. Goodwill is calculated by deducting the fair market value of a company's identifiable assets and liabilities from the purchase price. For example, if Company A pays more than Company B's net assets, the excess amount is considered goodwill.

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    Types of goodwill

    There are two types of goodwill, Institutional (Enterprise) or Professional (Personal).

    Institutional goodwill may be described as the intangible value that would continue to inure to

    the business without the presence of specific owner. Professional goodwill may be described as

    the intangible value attributable solely to the efforts of or reputation of an owner of the business.

    The key difference between the two types of goodwill is whether the goodwill is transferable

    upon a sale to a third party without a non-competition agreement.

    Calculating goodwill

    In order to calculate goodwill, the fair market value of identifiable assets and liabilities of the

    company acquired is deducted from the purchase price. For instance, if company A acquired

    100% of company B, but paid more than the net market value of company B, a goodwill occurs.

    In order to calculate goodwill, it is necessary to have a list of all of company B's assets and

    liabilities at fair market value.

    Fair market value

    Accounts Receivable $10

    Inventory $5

    Accounts payable $6

    -------------------------

    Total Net assets = $10 + $5 - $6 = $9

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