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How is goodwill different from other intangible assets?

An asset, which has no physical existence such as corporate intellectual properties (patents, trademarks, business methodologies and copyrights), trademarks, patents, software, goodwill and brand recognition are known to be an “Intangible asset”.

Types of Intangible assets and their recognition How is goodwill different from other intangible assets?

Intangible assets of the business are either acquired through a business combination or are developed internally. In most of the cases if the asset is acquired through an acquisition or a merger than it is recorded at its fair value while if the assets are generated internally than it is accounted for according to the amount of the costs incurred during the development phase of the asset.

Under IFRS the … Read more

The Acquisition Method illustrated

The short case:

The company A Corp is purchasing all shares in B Corp. Control is acquired by A Corp, B Corp disappears from the economic entity, and B or B’s shareholders receive either A Corp stock or other property. This will result in a business combination which means A Corp’s acquisition of control over the business of B Corp. The Acquisition Method illustrated The Acquisition Method illustrated

The acquisition will be accounted for as a ‘purchase’, this means that the acquired assets will be entered on the acquirer’s (A Corp’s) books at their current cost to it and liabilities will be credited at their current values; i.e., the total purchase price will be allocated among the individual assets Read more

Fixed income: Accounting for expected credit losses

The ability to delay the recognition of credit losses on loans until there is evidence of a trigger event has been identified as one of the weaknesses in the incurred loss model outlined in IAS 39. To tighten up the credit loss rules, a forward-looking impairment model has been built into IFRS 9 that is applicable for bonds classified as amortized cost or FVOCI. Reporting entities are required to make Expected Credit Losses (ECL) calculations for these bonds.

Generally, the loss allowance shall be calculated at an amount equal to the 12-month ECL unless there has been a significant increase in credit risk since the purchase date of the bond, at which time the loss allowanceRead more

Adjusted net asset method negative goodwill example

The asset accumulation method and the adjusted net asset method are both generally accepted business valuation methods of the asset-based business valuation approach. This is an example resulting in the recognition of negative goodwill. Other examples are intangible assets and tangible asset.

The valuation expert is again retained to estimate the value of 100 percent of the ownersequity of a company as of December 31, 2016. In this example, the company is called Blue Client Company (“Blue”).

Again, the assignment calls for a fair market value standard of value and a marketable, controlling ownership interest level of value.

The Blue December 31, 2016, historical cost basis balance sheet is again the same as the Red December 31, … Read more

Adjusted net asset method tangible asset example

The asset accumulation method and the adjusted net asset method are both generally accepted business valuation methods of the asset-based business valuation approach. This is an example resulting in the recognition of a revaluation to fair value of a tangible asset. Other examples are intangible assets and negative goodwill.

The valuation expert is again retained to estimate the value of 100 percent of the owners equity of the subject company, White Client Company (“White”), as of December 31, 2016.

Again, the valuation assignment calls for a fair market value standard of value and a marketable, controlling ownership interest level of value. White has the same GAAP-based balance sheet as did the hypothetical Red Client Company. Again, all … Read more

Adjusted net asset method intangible assets example

The asset accumulation method and the adjusted net asset method are both generally accepted business valuation methods of the asset-based business valuation approach. This is an example showing the recognition of an intangible asset. Other examples are tangible assets and negative goodwill.

An valuation expert is retained to estimate the value of 100 percent of the ownersequity of Red Client Company (“Red”), as of December 31, 2016. The assignment is to conclude fair market value of the Red equity on a marketable, controlling ownership interest basis.

Let’s assume that the valuation expert decides to apply the asset-based business valuation approach and the adjusted net asset value method. The valuation expert is going to revalue the … Read more