Briefly describe each of the above three approaches to accounting for goodwill Identify and briefly comment on...

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Accounting

Briefly describe each of the above three approaches toaccounting for goodwill
Identify and briefly comment on some of the criticisms of theexisting impairment model.
State support for a hybrid alternative where goodwill isamortized over 10 years as well as tested for impairmentperiodically

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The valuation of goodwill depends upon assumptions made by thevaluer Methods to be adopted in valuation of goodwill would dependon circumstances of each case and is often based on the customs ofthe tradeThe various methods that can be adopted for valuation ofgoodwill are follows1 Average Profit Method2 Super Profit Method3 Capitalization Method4 Annuity Method1 Average Profit MethodUnder this method the value of Goodwill is calculated bymultiplying the Average Future profit by a certain number of yearspurchaseGoodwill Future maintainable profit after tax x No of yearspurchaseThe first step under this method is the calculation of averageprofit based on past few years profit Past profit are adjusted inrespect of any abnormal items of profit or loss which may affectfuture profit Average profit may be based on simple average orweighted averageIf profits are constant equal weightage may be given See Answer

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