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Essay / Research Paper Abstract
5 pages. 'Accounting for goodwill presents the accountant with no particular difficulties'. This statement is discussed critically, and is answered in relation to the relevant accounting codes. Particular points are suggested with examples from companies as a way to better understand exactly what goodwill accounting is. Bibliography lists 5 sources.
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5 pages (~225 words per page)
File: D0_JAgdwlac.rtf
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Particular points are suggested with examples from companies as a way to better understand exactly what goodwill accounting is. WHAT IS GOODWILL ACCOUNTING? The dictionary might define goodwill as
creating a feeling of friendliness or support but in accounting goodwill is a different thing altogether. Goodwill when described on the balance sheet is that portion of a company
that accounts for their intangible assets such as consumer loyalty, recognition of brand names, and other types of things that have been earned through years of doing business. In the
past, businesses have been able to chalk off in some cases millions of dollars or even billions of dollars when merging with other companies because part of the purchase price
was that of the purchase of goodwill. "In 1995 the $19 billion Walt Disney Co.-Capital Cities/ABC merger reinforced this perception (ABC is the parent of the company that
publishes this magazine). Goodwill amounted to some $16 billion, or 84 percent, of the purchase price. Because goodwill must be amortized over no more than 40 years, Disney earnings will
be reduced by at least $400 million per year well into the next century" (Mcgoldrick 1997, 145). Goodwill accounting is
considered to be one of the most labor-intensive portions of accounting by many CPAs and accounting firms. "I must spend 50 percent of my time fielding questions from clients
who wish to avoid goodwill and who want to know how to qualify for pooling treatment," says Robert Willens, a Lehman Brothers managing director who specializes in tax and accounting
issues. "Managements care about this issue intensely. Theyll try to avoid goodwill at all cost" (Mcgoldrick 1997, 145). But the Financial Accounting Standards Board (FASB) is working on a
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