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What are the differences between negative goodwill and positive goodwill, and how are they treated in accounting?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 11Q: What is goodwill, and what are the unique aspects of accounting for it?

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Question

What are the differences between negative goodwill and positive goodwill, and how are they treated in accounting?

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

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