Entities Assessment Methods Based on the Notion of Goodwill

Abstract

In the last period we notice a special importance rightly given to goodwill, especially in terms of moral value. Thus, in accounting, goodwill is an intangible asset associated with a business combination. It is recorded when a company buys another company and the purchase price is greater than the fair value of the identifiable tangible and intangible assets acquired, less the liabilities that have been assumed. Goodwill is reported in the balance sheet as a long-term asset or fixed asset. For this reason, the fundamental purpose of our article is the presentation of the entity valuation methods based on the notion of goodwill, aiming to define the concept of goodwill, to expose the moral value of the goodwill and its calculation method, to review the literature regarding the valuation of the entity by means of goodwill, to present methods of valuation of the company based on the idea of goodwill, as well as to illustrate them by means of examples. Finally, the fulfillment of the proposed objectives will determine the design of a well-defined reflection on the notion of goodwill and its importance within the entities’ evaluation methods.

Keywords

• goodwill
• valuation methods
• entity value
• update rate
• profitability